• Prior to the close of last week's trading, the EUR/USD pair declined following a speech by John C. Williams, President of the Federal Reserve Bank of New York.
• According to reliable trading platforms, the US dollar rose against the euro and other G10 currencies after a speech by John C. Williams, President of the Federal Reserve Bank of New York. Williams, a voting member of the Federal Open Market Committee, said it was time to cut interest rates but was not enthusiastic about starting the cycle with a large 50 basis point cut.

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As a result, the euro fell against the US dollar EUR/USD 1.1065 after attempts to rebound higher with gains that reached the resistance level of 1.1155 and settled around the level of 1.1088 at the beginning of trading in the week of announcing the European Central Bank policy decisions amid expectations of a reduction in addition to the announcement of important US inflation figures. Williams had said in a speech he gave to the Council on Foreign Relations: “With the US economy now stable and inflation heading towards 2%, it is now appropriate to reduce the degree of restriction in the policy stance by reducing the target range for the federal funds rate.”

What the financial markets were looking for was any indication that the Federal Reserve was ready to cut US interest rates by 50 basis points. Instead, Williams said: “The stance of monetary policy could be moved to a more neutral framework over time depending on the development of data, expectations, and risks to achieving our objectives.”

He suggested there was no need to panic about the economy and the prospect of a more conventional 25bp cut seemed to disappoint the market, which had seen the odds of a 50bp move closer to 50%. Equity markets fell as expectations of a more aggressive pace of easing receded. In turn, US Treasury yields rose, as did safe-haven currencies such as the franc and the dollar. The euro/dollar exchange rate gave up its high of 1.1154 to trade at 1.1080 at the time of writing.

Before his speech, the very important US jobs report for August was released, and there was no "conclusive evidence" for supporters of a 50-basis point move. Certainly, the headline payroll figure was below expectations at 160,000 at 142,000, but this was higher than July and was not a big surprise. Additionally, the unemployment rate fell to 4.2% from 4.3%, and earnings beat expectations at 0.44% month-on-month, which was stronger than the expected 0.3%.

What will affect the EUR/USD pair in the coming days?

All eyes are now on this week’s US inflation figures, as a significant drop in expectations could activate bets on a 50-basis point move, which could in turn boost the EUR/USD exchange rate. However, anything close to consensus would warrant a 25-basis point move, which could keep the pair under pressure as the US dollar continues to make a comeback in September.

According to stock trading platforms, Wall Street markets end the week sharply lower. According to trading, US stocks fell on Friday, affected by concerns about a slowing Labor market and technology selloffs. The S&P 500 fell 1.7%, the Dow Jones lost 409 points, and the Nasdaq fell 2.5%. Big tech stocks like Amazon (-3.6%), Alphabet (-4%), and Meta (-3.2%) saw big losses, while chipmakers like Broadcom (-10.3%) and Nvidia (-4.1%) also saw sharp declines. According to the economic calendar, the US jobs report for August, which showed 142,000 new jobs versus 161,000 expected, added to the market tension. In addition, comments from Federal Reserve Governor Christopher Waller increased expectations for a further US interest rate cut in September. Also, he emphasized the growing risks in the Labor market and expressed his openness to cutting interest rates further if necessary. Over the past week, the S&P 500 lost about 4%, recording its worst week since March 2023. Likewise, the Nasdaq fell 5.6%, recording its worst start to September since 2001. Similarly, the Dow Jones fell 2.5%, recording its biggest decline in early September since 2008.

EUR/USD Technical analysis and forecast:

According to the daily chart, the Euro against the US Dollar EUR/USD is in a neutral position, and the trend will be more bullish if it moves towards the resistance levels of 1.1120 and 1.1200, respectively. On the other hand, and for the same period of time, the support level of 1.0945 will remain the most important for bears to control the trend again. Ultimately, we expect the Euro Dollar price to remain in narrow ranges until the reaction to the announcement of the European Central Bank policy decisions and the US inflation figures.

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