Dollar strengthens while awaiting Fed signals

The euro ends the week under pressure from the US dollar. Yesterday, it briefly fell to 1.1215 dollars amid a sharp rise in US Treasury bond yields. The focus of the currency market remains on US labor market data, since it is these that could influence expectations regarding the further policy of the Federal Reserve.

Yesterday's statistics from the US were generally favorable for the dollar. The number of new jobless claims for the week fell to 197 thousand versus a revised 198 thousand the week before. The figure came in below market expectations of around 200 thousand. At the same time, the number of continuing claims decreased to 1.701 million. These data indicate the continued resilience of the US labor market.

News from the Eurozone is also important for the euro. Yesterday, Eurostat reported that the unemployment rate in the currency bloc in August was 6.4%, unchanged from July. However, the figure is slightly higher than the level a year ago — 6.3%.

At the same time, Eurozone industrial statistics looked relatively positive. The manufacturing PMI in September rose to 52.9 points from 52.7 in August. A value above 50 points points indicates an expansion in business activity. Growing new orders and output support the euro, although accelerating price pressures remain a risk factor.

The main event — today's US employment data

Today, October 2, the market awaits the release of the week's main economic report — US employment statistics for September. According to the current consensus forecast, the US economy may have created about 90 thousand new jobs after employment grew by 162 thousand in August. The unemployment rate is expected at 4.1%.

It is this report that can cause a significant move in EUR/USD. Stronger employment and wage data could support the dollar, as it would point to the continued resilience of the US economy. Weaker statistics, on the contrary, could strengthen expectations of a softer Fed policy and put pressure on the US currency.

Thus, the situation on FOREX today will largely depend on US statistics. At the same time, the relatively stable Eurozone labor market and improving industrial activity indicators remain an important counterbalance for the euro. Traders are likely to act cautiously until the US report is released, since it is the market's reaction to the employment data that may determine the direction of EUR/USD at the end of the week.