EUR/USD Fundamental Analysis – week of September 5, 2016

The EUR/USD reversed gains late in the session on Friday to trade at 1.1155 down 0.38% for the week. With the US on holiday at the beginning of the week, there is not much expectation for volatility. Thursday will give us the first bit of economic data with the ECB meeting and Mario Draghi’s press conference which should still up some interest. U.S. employment growth slowed more than expected in August after two straight months of robust gains and wages were tepid, which could effectively rule out an interest rate increase from the Federal Reserve this month.

Nonfarm payrolls rose by 151,000 jobs last month after an upwardly revised 275,000 increase in July, with hiring in manufacturing and construction sectors declining, the Labor Department said on Friday. The unemployment rate was unchanged at 4.9 percent as more people flocked to the labor market.

The report came on the heels of news on Thursday that the manufacturing sector contracted in August for the first time in six months, which had already cast a shadow on a rate hike at the Fed’s Sept. 20-21 policy meeting.

Last month’s jobs gains, however, could still be sufficient to push the U.S. central bank to tighten policy in December.

“It reduces the likelihood that the Fed will raise rates in September, but the labor market remains strong enough to support a rate hike in December,” said John Silvia, chief economist at Wells Fargo Securities in Charlotte, North Carolina.

Most early indications suggest the Brexit vote hasn’t stalled the Eurozone’s recovery, with some measures of activity pointing to a slight pickup during August. But a survey carried out by the European Commission and published Tuesday showed Eurozone businesses and consumers became less upbeat about their prospects during the month. If sustained, that could weigh on spending.

Just as concerning for the ECB, the survey also found that Eurozone manufacturers expected the prices they charge to fall over the coming year, while service providers expect their prices to rise more slowly than they did in July. Consumers also expect prices to rise more slowly.

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This Week’s Economic Events That You Should Be Monitoring:

 Government Bond Auctions

Date Time       Country           Auction

Sep 06 11:00 Austria Holds bond auction

Sep 06 11:30 UK 1.5% 2026 Gilt

Sep 06 11:30 Germany Holds I/L bond auction

Sep 07 10:30 Denmark Holds bond auction

Sep 07 11:03 Sweden Holds bond auction

Sep 07 11:30 Germany Eur 5bn 0% Aug 2026 Bund

Sep 08 11:00 Ireland Holds bond auction

Sep 08 17:20 Italy Announces details of bond auction