Fed funds futures are currently pricing in a 2.0% chance of a rate hike by the end of the year which is slightly higher from a month ago. Interest rate expectations have started to rise after they reached as low as zero following the FOMC’s rate decision. Nevertheless, policy makers will most likely refrain from raising rates until the economy starts to see job growth. Therefore, this week’s U.S. employment data will go a long way toward influencing future policy decisions and their impact of the EURUSD’s price action. We have already seen the ADP private jobs report disappoint with a expected job loss of 254K versus 200K. A similar result from Friday’s NFP report could significantly sink yield expectations.
Equity markets stumbled early today on the back of a disappointing Chicago PMI reading which showed that activity in the region unexpectedly contracted. The 46.1 reading missed early estimates of 52.0 and raised questions about future domestic growth. Markets were also unnerved by the larger than expected job loss in the ADP private jobs report which is an early indicator for Friday’s NFP report. However, markets have erased earlier losses which could be a bullish sign considering the weak data. Yet, we are starting to see a developing bearish channel which could be a sign of future weakness which could weigh on the EUR/USD.
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