Forex News

• EUR/USD struggles to attract buyers as softer US data fail to meaningfully weaken the US Dollar.
• Hawkish Fed expectations keep the Greenback supported ahead of Friday’s Nonfarm Payrolls report.
• Eurozone inflation strengthens the case for an ECB hike in September.

EUR/USD struggles to attract buyers on Tuesday despite below-forecast US economic data, as the US Dollar (USD) shows little weakness following the release. At the time of writing, the pair trades around 1.1601 after touching an intraday low of 1.1587, but remains down roughly 0.14% on the day.

The ISM Manufacturing Purchasing Managers Index (PMI) fell to 54.6 in August from 55.6 in July, missing the market forecast of 55.2. The ISM Prices Paid Index held steady at 71.1, below expectations of 72.0, while JOLTS Job Openings rose to 7.271 million in July from 7.182 million but fell short of the 7.3 million forecast.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, retreats toward 99.55 after reaching an intraday high of 99.65. However, the downside in the US Dollar remains limited as the data do little to alter hawkish Fed expectations, with broader market sentiment still tied to inflation concerns.

Fed Chair Kevin Warsh’s tough stance at the Jackson Hole Symposium put September rate hike bets firmly back on the table. Adding to the hawkish tone, Fed Governor Michael Barr said on Tuesday that “the persistence of inflation above target creates risks.” Barr added that he favours steady rates if confident inflation is moderating but warned that “if inflation doesn’t moderate soon, it will be time for an interest rate hike.”

According to the CME FedWatch Tool, traders see around a 66% probability that the central bank will raise borrowing costs at its September 15-16 meeting. Attention now shifts to Friday’s Nonfarm Payrolls (NFP) report.

Elevated Oil prices due to tensions in the Middle East are also adding to inflation risks across major economies, reinforcing expectations that central banks will maintain a hawkish stance. Against this backdrop, the European Central Bank (ECB) is widely expected to raise interest rates this month.

Data released earlier in the day showed that the Eurozone Harmonized Index of Consumer Prices (HICP) rose 0.4% MoM in August, accelerating from the 0.2% increase recorded in July. Core HICP increased 0.2% after remaining flat in the previous month. ECB policymaker Gediminas Šimkus said on Tuesday, “It is clear that we should hike rates in September,” adding, “New projections are likely to move the rate path up a bit.”

TD Securities’ macro team, led by Jayati Bharadwaj, Howard Du and Linda Cheng, maintains a bearish view on the Dollar despite a hawkish market reaction to Chair Warsh’s Jackson Hole speech. They argue incoming US data still point to a September Fed hold, with the broader USD trend seen weaker into year-end as US midterm election scenarios and macro fundamentals drive FX.

Fed path and midterm scenarios

"We maintain a bearish USD bias as incoming data should steer the Fed toward a September rate hold decision. We like fading any USD rallies against SEK and AUD in G10 and against MXN and ZAR in EM."

"Words alone are unlikely to be enough to shift the broader FX narrative. A durable USD rebound will require more convincing policy follow-through and renewed upside surprises in US data. In the absence of new shocks, incoming data should steer the Fed toward a near-term rate hold rather than a rate hike."

"Market attention should gradually shift toward the US midterm election after Labor Day. The USD should trade moderately weaker to neutral on gridlock, but a "Blue Wave" could lead to some material knee-jerk USD strength."

"Our baseline forecast expects the USD to modestly weaken into year-end as macro drivers alleviate bullish USD pressures. A "Blue Wave" scenario on the other hand could lead to more knee-jerk USD strength as the US regains some institutional credibility and long-dated Treasury term premium falls."

"To the contrary, the scenario of Republicans maintaining full Congress control would be the most bearish for the USD. We like lower USD/SEK in the case of a divided Congress on seasonality, FX valuation, and 2018 analog; own USD/CNH in case of "Blue Wave" risk scenario."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

TD Securities’ Ryan McKay and Bart Melek note that positioning in Gold remains resilient despite a more hawkish Jackson Hole speech from Fed Chair Warsh. While the recent rally is seen as premature given lingering inflation concerns and renewed hike pricing for 2027, they argue the broader backdrop has improved and do not foresee material downside as Dollar debasement and uncertain Fed hikes support precious metals.

Yellow metal holds firm post-Jackson Hole

"Fed Chair Warsh struck a more hawkish tone in his Jackson Hole speech as he acknowledged the inflation concerns."

"This has sapped some life from the precious metals complex as expected, but thus far pricing has remained well-supported."

"Hike pricing has increased to just over two hikes in 2027 again, and we have argued the recent rally in gold was too early due to these lingering inflation concerns."

"Moving forward, we do not anticipate material downside for the yellow metal as the landscape for precious metals has improved amid a renewed dollar debasement theme, while Fed hikes remain far from certain."

"Positioning in gold is holding firm in the aftermath of a more hawkish tone at Jackson Hole, while renewed tensions in the Middle East see CTAs turn buyers in crude oil."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Gold slides further on Tuesday after reversing from a more-than-three-month high last week.
• Hawkish Fed expectations and rising Treasury yields keep the precious metal under pressure.
• XAU/USD tests a key support zone as momentum shifts in favour of sellers.

Gold (XAU/USD) extends its pullback from the more-than-three-month high touched last week and falls to a fresh two-week low on Tuesday. Rising expectations of Federal Reserve (Fed) interest rate hikes and fresh tensions in the Middle East remain the main drivers behind the latest leg lower, while softer-than-expected US economic data help cushion the downside.

At the time of writing, XAU/USD trades around $4,370, down nearly 1.72% on the day.

The ISM Manufacturing Purchasing Managers Index (PMI) fell to 54.6 in August from 55.6 in July, missing the market forecast of 55.2. The ISM Prices Paid Index held steady at 71.1, below expectations of 72.0, while JOLTS Job Openings rose to 7.271 million in July from 7.182 million but fell short of the 7.3 million forecast.

Softer-than-expected US economic data weigh modestly on the US Dollar (USD), prompting the Greenback to trim some of its earlier gains. The US Dollar Index (DXY), which tracks the currency against a basket of six major peers, trades around 99.53, while the benchmark 10-year US Treasury yield eases to around 4.76% after touching 4.80%, its highest level since January 2025. However, the hawkish Fed repricing is likely to limit the downside in both the US Dollar and Treasury yields.

A firmer US Dollar makes Dollar-denominated Gold more expensive for overseas buyers, while higher Treasury yields increase the opportunity cost of holding the non-yielding metal.

Following Fed Chair Kevin Warsh’s tough rhetoric on inflation at the Jackson Hole Symposium, interest rate hike bets are firmly back on the table. Traders now see the central bank raising borrowing costs as soon as this month, with the CME FedWatch Tool showing around a 65% probability of a hike at the September 15-16 meeting, up from roughly 40% a week ago.

Fed Governor Michael Barr said on Tuesday that “the persistence of inflation above target creates risks.” Barr added that he favours steady rates if confident inflation is moderating, but warned that “if inflation doesn’t moderate soon, it will be time for an interest rate hike.”.

At the same time, rising Oil prices are adding to inflation concerns and reinforcing expectations that worldwide central banks may need to keep monetary policy tight. West Texas Intermediate (WTI) Oil advances for the second consecutive day following the latest flare-up around the Strait of Hormuz.

Typically, inflation and geopolitical concerns support Gold. However, the market is currently reacting through the interest rate channel, and the metal tends to perform poorly when interest rates and Treasury yields rise.

Sellers are therefore likely to retain the upper hand in the near term, although upcoming US economic data and developments in the Middle East could trigger fresh volatility. Attention now shift to the ADP Employment Change report on Wednesday and the closely watched Nonfarm Payrolls (NFP) report on Friday.

Technical analysis: XAU/USD extends decline, eyes support near $4,350

On the daily chart, XAU/USD extends its decline below the 200-day SMA and is now testing the 100-day SMA near $4,365, a level that also aligns closely with the 50% Fibonacci retracement at $4,350, forming a key support zone. A daily close below this cluster would tilt the near-term bias bearish, exposing the 61.8% retracement near $4,267.

The Relative Strength Index (RSI) at 49 sits near the midline, hinting at balanced conditions, while the Moving Average Convergence Divergence (MACD) indicator is in negative territory, suggesting waning bullish momentum after the recent pullback.

On the downside, a break below the $4,350-$4,365 support zone would open the door toward $4,267 (61.8% retracement), followed by $4,149 (78.6% retracement) and the prior cycle low near $4,000.

On the upside, initial resistance emerges at $4,432 (38.2% retracement), with a stronger barrier near $4,530 (200-day SMA) and $4,534 (23.6% retracement). A sustained break above this zone would open the path toward the $4,700 region.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• ISM Manufacturing PMI ticked lower to 54.6 in August, missing consensus.
• The US Dollar fades the recent weakness, advancing modestly.

In August, the US manufacturing sector's economy lost some momentum. Indeed, the ISM Manufacturing PMI dropped from 55.6 in July to 54.6, which was also lower than analysts' predictions of 55.2.

The Employment Index fell to 51.2 from 52.8, which means that the sector's payrolls are having some trouble. The Prices Paid Index, which monitors inflation, held steady at 71.1. Finally, the New Orders index retreated to 53.7 from 56.7 in the previous reading.

From the release: “Regarding output, the Production Index expanded for the 10th month in a row (though at a slower pace) with the positive-to-negative comment ratio dropping in August (2.2 positive comments for every negative one, versus a 3.3-to-1 ratio in July). The Employment Index remained in expansion but lost 1.6 percentage points. The positive-to-negative comments ratio on Employment also dropped (1.3-to-1, compared to 1.5-to-1 the previous month)”, argued Susan Spence, MBA, Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.

Market reaction

The US Dollar (USD) trims part of its earlier gains following Monday’s pullback, prompting the US Dollar Index (DXY) to trade with modest gains in the 99.50-99.60 band in the wake of the data releases.

This section below was published as a preview of the US ISM Manufacturing report for September at 12:30 GMT.

• The US ISM Manufacturing PMI is expected to weaken slightly in August.
• Investors will also follow the ISM Prices and the Employment indices. 
• EUR/USD has broken below its 200-day SMA, a herald for probable extra losses.

Attention shifts to Tuesday’s release of the August ISM Manufacturing Purchasing Managers Index (PMI), one of the most closely followed indicators of activity in the US manufacturing sector and an important barometer of the broader economy.

Markets expect the headline index to worsen a tad to 55.2 in August (from 55.6). That would be the eighth consecutive month with the index above the key 50 level that separates expansion from contraction, further suggesting that manufacturing activity continues to expand despite ongoing challenges.

But the story of the manufacturing sector is only part of the overall picture. The broader US economy has continued to prove impressively resilient thanks to solid growth results and healthy job creation despite the latest cooling in hiring. That resilience has kept the narrative of US “exceptionalism” alive, contrasting with many of its G10 peers.

But it will be more than just the headline figure that matters for investors. Signs of improving demand, new orders or employment could raise confidence that manufacturing remains solid and stable, while a disappointing report would add to concerns that the sector is struggling to gain meaningful traction despite the economy's broader upbeat tone.

What to expect from the ISM Manufacturing PMI report?

The manufacturing sector advanced to levels last seen more than four years ago in July, with business activity managing to stay in the expansion territory for the seventh consecutive month and extending the promising start to the year.

A glimpse at the July figures saw the New Orders component climbing to two-month highs at 56.7, suggesting demand remained solid. At the same time, price pressures eased for the third month in a row as the Prices Paid Index fell to 71.1 (from 73), showing that inflationary pressures in the manufacturing sector appear to be slowly cooling. The picture in the labour market has also improved, with the Employment Index rising to 52.8 (from 49.7) in the prior month, the highest reading since August 2022, signalling that hiring conditions are still improving.

A reading above 50 on the ISM Manufacturing PMI is generally considered a sign of expansion in factory activity, with a reading below that point indicating contraction. However, history suggests that sustained levels above 42.5 are still generally consistent with growth in the overall US economy.

A stronger-than-expected PMI would likely boost confidence in the resilience of the US economy for markets and underpin equities and broader risk sentiment.

But the implications for the US Dollar are less straightforward. A stronger report could also stoke expectations that the Federal Reserve (Fed) will hold interest rates at restrictive levels for longer, providing more support for the currency. A stronger report tends to favour the Greenback. On the flip side, a softer-than-expected reading could raise concerns about the manufacturing outlook and dampen sentiment.

When will the ISM Manufacturing PMI report be released, and how could it affect EUR/USD?

The ISM Manufacturing PMI report is scheduled for release at 14:00 GMT on Tuesday.

During the prior week, EUR/USD has weakened markedly, even breaching below its critical 200-day SMA, which has subsequently allowed for a deeper retracement.

Pablo Piovano, Senior Analyst at FXStreet, explains that further losses now appear more likely, with the immediate support at the provisional 100-day SMA near 1.1570. The loss of this short-term contention zone could lead to a test of the minor support at 1.1511 (August 13), ahead of the intermediate 55-day SMA around 1.1490.

On the other hand, “if the pair manages to reclaim the 200-day SMA, it could then embark on a potential revisit to the August ceiling at 1.1711 (August 21)", Piovano adds.

“Momentum indicators also suggest that extra declines should not be ruled out, as the Relative Strength Index (RSI) has retreated sharply and flirts with 51, while the Average Directional Index (ADX) above 40 suggests that the current trend is quite solid”, he concludes.

The number of job openings rose slightly to 7.271 million in July from 7.182 million in June, the US Bureau of Labor Statistics (BLS) reported on Tuesday. This reading came in below the market expectation of 7.3 million.

"Hires and total separations both changed little at 5.1 million," the BLS noted in its press release. "Within separations, quits (3.1 million) and layoffs and discharges (1.7 million) were little changed."

Market reaction

This report failed to trigger a noticeable market reaction. At the time of press, the US Dollar (USD) Index was up 0.15% on the day at 99.55.

This section below was published as a preview of the US JOLTS Job Openings data at 10:00 GMT.

• US JOLTS Openings are forecast to have eased to 7.3 million in July from 7.359 million in the previous month.
• Market players lift bets for a September Federal Reserve rate hike ahead of employment data releases.
• EUR/USD struggles to hold 1.1600 as inflation-related concerns weigh on the mood.

The US Bureau of Labor Statistics has a busy week, releasing relevant employment data. It will start on Tuesday with the publication of the July Job Openings and Labor Turnover Survey (JOLTS) at 14:00 GMT. The report, which gathers US employers’ estimates of job openings, hires, and separations nationwide, is closely watched by the market, as it typically comes ahead of an array of employment gauges released throughout the week, culminating in the key Nonfarm Payrolls (NFP) report on Friday.

JOLTS figures are a gauge of labor demand, though there’s a one-month delay: the data correspond to July, while the upcoming NFP report will be based on August data. Back in July, the United States (US) economy lost 23,000 jobs, which means the upcoming JOLTS release is likely to reflect tepid demand.

Generally speaking, a weak labor market leads to interest rate cuts, as central banks try to stimulate economic growth. However, at the time being, inflation is much more worrisome than the labor situation.

The Middle East conflict escalated over the weekend as Iran and the US resumed exchanging fire, pushing Oil prices sharply higher at the beginning of the week, with a barrel of West Texas Intermediate (WTI) trading above $85, suggesting energy prices are likely to push global inflation higher.

What to expect in the next JOLTS report?

As previously mentioned, the JOLTS report is expected to show job openings stood at 7.3 million in July, slightly below 7.359 million in June. The anticipated 7.3 million will remain above the 2025 average of 7.08 million openings, which means markets are unlikely to react to the headline. A reading closer to 7.08 million could be much more worrisome and negatively impact the US Dollar (USD), at least in the near term. At the other extreme, Job openings topped 7.6 million in April, suggesting a reading closer to or above the latter should boost demand for the USD.

Federal Reserve (Fed) Chairman Kevin Warsh spoke at the Jackson Hole Symposium last Friday and noted that labor conditions are consistent with full employment. He also said that this resilience provides little comfort regarding price pressures, as wage growth and consumer demand complicate the path to disinflation. Chair Warsh was clear: the labor market is not a problem, inflation is. His words fueled speculation that the central bank will deliver an interest rate hike at its meeting later this month, and the JOLTS Job Openings report has no chance of altering such sentiment.

When will the JOLTS report be released and how could it affect EUR/USD?

Job Openings will be published on Tuesday at 14:00 GMT, and ahead of the release, the EUR/USD pair is struggling to retain the 1.1600 level, having pierced the benchmark at the weekly open amid renewed Middle East tensions.

Valeria Bednarik, FXStreet Chief Analyst, notes: “EUR/USD retreats after trading as high as 1.1710 in mid-August, but so far, the decline seems corrective. The daily chart shows that the pair battles around a mildly bullish 20-day Simple Moving Average (SMA) while bouncing from around a flat 100-day SMA. The same chart shows technical indicators pared their slides after nearing their midlines and are posting modest bounces, suggesting buyers are willing to add at these levels.”

Bednarik adds: “The 100-day SMA at around 1.1570 provides immediate support ahead of the 1.1520 price zone. If the latter gives up, EUR/USD could extend its slide towards the 1.1460 area, while additional slides will signal that bears took control. Resistance, on the other hand, comes at 1.1650, followed by the August top around 1.1710. Further gains seem unlikely in the current risk-averse scenario and as long as investors keep betting for a September Fed hike.”

Brown Brothers Harriman’s (BBH) Elias Haddad highlights that rising global bond yields and firmer Oil prices have pushed 30-year US Treasury yields back to pre-buyback levels, while USD/JPY has largely retraced its post-intervention slump. Treasury Secretary Scott Bessent’s framing of buybacks and yen intervention as signals effectively caps longer-term yields and USD/JPY, raising the cost of betting against Treasuries or the Japanese Yen (JPY).

Signals cap yields and Dollar Yen

"Global bond yields are rising to fresh highs, reflecting firmer crude oil prices and a higher expected path for major central banks’ policy rates."

"30-Year Treasury yields have erased the drop that followed the August 19 US Department of the Treasury buyback announcement, while USD/JPY has largely retraced its post July 31 joint US-Japan intervention slump."

"Treasury Secretary Scott Bessent defended the unscheduled buyback announcement as a signal, not an attempt to dictate market prices. His aim was to make sure market participants know that things aren’t a one-way trip, and that they’re “looking at fundamentals, and that the market does not dictate policy.”"

"Neither guarantees a reversal but both raise the cost of betting against Treasuries or JPY."

"The same logic likely applies to the yen intervention. In effect, Bessent has placed a cap on longer-term Treasury yields and USD/JPY."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/JPY advances toward 160.05 on Tuesday, gaining 0.19% on the day.
• Japan’s 10-year government bond yield reaches 3% for the first time since 1996.
• Scott Bessent expects Japanese authorities to take measures that could support the Japanese Yen.

USD/JPY trades around 160.05 on Tuesday at the time of writing, gaining 0.19% on the day, as the Japanese Yen (JPY) remains under pressure against the US Dollar (USD). The Japanese currency fails to benefit from rising domestic bond yields or comments from US Treasury Secretary Scott Bessent supporting a stronger Japanese Yen.

Japan’s 10-year government bond yield reaches 3% for the first time since September 1996. The rise comes amid inflation risks stemming from higher energy prices and speculation that the Bank of Japan (BoJ) may need to raise interest rates more quickly.

The increase in yields also reflects concerns over Japan’s public finances. Prime Minister Sanae Takaichi’s government plans significant investment spending, while a sustained rise in borrowing costs could increase the cost of servicing Japan’s massive public debt. These fiscal concerns appear to limit the support provided to the Japanese Yen by expectations of tighter monetary policy.

Meanwhile, US Treasury Secretary Scott Bessent says on Tuesday that he expects the Japanese government and the BoJ to take measures that would lead to a stronger Japanese Yen. His comments suggest that US authorities would like to see the Japanese central bank further normalize monetary policy.

Japanese Finance Minister Satsuki Katayama also says she met with Bessent, adding that both officials agreed on the importance of orderly Japanese Yen movements for global market stability. The United States (US) and Japan also reaffirm their willingness to continue cooperating on foreign exchange matters.

However, the Japanese Yen remains weak despite these comments and the rise in Japanese yields, allowing USD/JPY to approach the psychological 160.00 level once again. The Japanese currency’s limited reaction suggests that fiscal concerns continue, for now, to offset expectations of further monetary tightening by the BoJ.

Commerzbank’s Dr. Vincent Stamer notes that Euro area headline inflation rose to 3.3% in August from 2.9% in July, driven mainly by higher energy prices linked to the Middle East conflict. Core inflation edged down to 2.4%, but the renewed move above 3% is seen as cementing an ECB rate hike in September, with further hikes unlikely as inflation is projected to ease next year.

Inflation dynamics and ECB outlook

"Inflation in the euro area jumped to 3.3% in August, up from 2.9% in July. Once again, rising energy prices in the wake of the conflict in the Middle East were largely responsible for this. Overall, the inflation rate was in line with expectations, but the core rate unexpectedly fell from 2.5% in July to 2.4% in August."

"We expect that in the coming months, many businesses – particularly in the manufacturing and food production sectors – will pass on the higher energy prices. In particular, high natural gas prices are likely to drive up costs in these sectors in the coming quarters. As a result, the core inflation rate is set to rise significantly over the course of the coming year."

"With the headline rate rising to 3.3%, inflation has moved further away from the ECB’s 2% target. Furthermore, inflation is moving ever closer to the ECB’s staff projections (Chart 2), in which the ECB has factored in two interest rate hikes. This clearly points to another interest rate hike by the ECB in September."

"It is unlikely that further rate hikes will follow after that, as the inflation rate is expected to fall again next year, in line with the ECB’s projections."

"According to preliminary data from Eurostat, headline inflation in the euro area jumped to 3.3% in August – up from 2.9% in July. Economists surveyed in advance had expected this. By contrast, the inflation rate excluding energy, food, alcohol and tobacco (core inflation) unexpectedly fell from 2.5% in July to 2.4% in August."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Federal Reserve Governor Michael Barr said inflation remains too high and warned that a rate hike could become necessary if price pressures fail to moderate soon. Although he favours keeping rates steady while disinflation continues, solid economic growth and a stable labour market mean that persistent inflation remains a significant policy risk.

Key Quotes

Inflation remains too high.

Favours keeping rates steady if confident that inflation is moderating.

The labour market is stable, with low unemployment.

The economy is growing solidly, boosted by artificial intelligence investment.

If inflation does not moderate soon, it will be time for an interest rate hike.

Persistent inflation above target creates risks.