Euro nears year’s lows again: market awaits fresh US signals
The euro once again came under pressure on the global currency market. After a brief upward correction on Tuesday, the single European currency started to decline again on Wednesday. The EUR/USD pair dropped to the 1.1165 dollar level, nearly returning to the lows seen at the beginning of the week. On Tuesday, the euro closed around 1.1257 dollars, but on Wednesday it lost about 0.6%.
Thus, the 1.1160–1.1200 area is once again becoming the most important support zone for the euro. The pair was near 1.1160 at the start of the week, reaching its lowest level in about 17 months. If this support is confidently broken, pressure on the European currency could intensify and open the way to lower levels.
Why is the euro falling again?
One of the main reasons remains the strength of the US dollar. On Wednesday, the dollar received additional support after the release of the minutes from the latest Federal Reserve meeting. It shows that inflation risks remain a serious problem for the US central bank, and some Fed officials allow for further monetary tightening. As a result, the dollar index again approached its highs of recent months.
An additional negative factor for the euro remains the problems of French public finances. Despite some easing of tension in the French bond market, investors do not yet consider the country's budget problems resolved. At the same time, high energy costs related to geopolitical tensions around Iran and the situation in the Strait of Hormuz are increasing inflation risks and putting pressure on global markets.
Today the focus will shift to the US labour market
On Thursday, October 8, one of the main events for FOREX will be the release of weekly data on initial jobless claims in the US. According to the market forecast, the number of new claims is expected at around 200 thousand versus 197 thousand a week earlier. Continuing claims are forecast at about 1.75 million.
These data could significantly affect the dollar, especially in light of the recent weak US employment report. If the number of claims turns out to be substantially higher than expected, the market may strengthen expectations of a slowdown in the American economy. This could lead to lower Treasury yields and a weaker dollar — thus creating conditions for a recovery in EUR/USD.
If the statistics turn out to be better than expected and show the resilience of the US labor market, the dollar could get a new wave of buying. In that case, the euro risks again approaching the 1.1160 support.
