Since early September, global financial markets have been displaying strong turbulence. After the thin market on Labor Day yesterday, the economic calendar reminds traders about an abundance of data on the US labor market later this week.
The nonfarm payrolls will be crucial for the US central bank when choosing an option for cutting the funds rate at the meeting on September 18. All in all, markets expect the Federal Reserve to cut interest rates by an overall 100 basis points at the three policy meetings left until the year end.
At the same time, many analysts still believe that the Federal Reserve will ease its monetary policy more rapidly in the coming quarters than the G-10 regulators. Curiously, the US dollar bulls prefer not to look that far ahead. Indeed, the US dollar index which measures the greenback’s strength against 6 major currencies is still recovering today from the low of August.
The US dollar index slumped by 2.2% in August due to expectations of a rate cut in the US. On the first trading day of September, the index touched a 2-week high of 101.79. Today it is trading higher within an intraday corridor of 101.6 to 101.8 points. Where does the greenback get such agility?
Of course, every currency relies, first and foremost, on a strong economy. Historically, a batch of data on the labor market is released on the first week of each month in the US. The first report in this series will only be available tomorrow. Today, the most important indicator will be the US manufacturing PMI.
Business activity in the manufacturing sector is expected to gather pace last month. The ISM PMI is projected to rise to 47.5 in August. However, overall, it is still in negative territory, that is, below the 50 level. So, when analyzing the indicator, you need to keep in mind its two opposite effects on the US dollar and through it on other assets.
If the index comes out below forecasts, this is an argument for the Federal Reserve in favor of a sharper rate cut. In turn, it is a signal for the dollar to lose ground. If the PMI comes out at 47.5 points and is even stronger than expected, the US dollar will assert its strength. Thus, the demand for risky assets will go down.
This market law worked out for the euro in the first half of the day. The single currency was trading close to the two-week low of 1.1042 reached in the previous session versus the US dollar. However, the euro is not going to give up.
Indeed, the euro/dollar pair is still sticking to the upper border of the psychological area of 1.1000 to 1.1050. This indicates an ongoing downward correction from the local high of the medium-term trend.
To extend the decline, the bears need to hold the instrument below 1.1050. However, this will only lead to a local shift to the lower border of the above-said psychological area. Nevertheless, this will in no way cancel the overall bullish trend in the euro/dollar pair.
Our analysts admit that yesterday's stagnation in the market may continue today, especially during the European trading session. At the same time, amid the empty economic calendar, the euro may react to comments from policymakers of the European Central Bank. Today, the head of the ECB Supervisory Board Claudia Buch and her colleague Kerstin Jochnick will make statements at 08:00 Eastern time and 10:00 Eastern time respectively.
The fact is that inflation in the EU is slowing down much faster than in the US. So, the European regulator may hint at a slightly more active easing of monetary policy. In turn, this could be bullish for the US dollar.
However, such a development is unlikely since regulators do not make decisions based on economic data alone. They are more interested in their dynamics over time. The recent decline in inflation in Europe may be temporary.

00:00 INTRODUCTION
00:35 USDX
01:24 US BUSINESS ACTIVITY
INDEX
02:42 EUR/USD
03:36 ECB
04:10 ECB AND FRS
04:43 BTC/USD
05:24 BRENT
06:14 USD/RUB

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