FOREX Fundamental analysis for EUR/USD on May 3, 2024
The fight against inflation turned out to be less difficult than expected, even taking into account the OECD estimates. The organization raised its global GDP forecast for 2024 from 2.9% to 3.1% and expressed confidence in a further slowdown in inflation, which will enable Central Banks to begin a gradual easing of monetary policy. The OECD highlighted the strength of the American economy, which is ahead of the European one. Nevertheless, the EURUSD is strengthening ahead of an important report on the US labor market
According to the OECD comments, "less hard" means fewer job losses. Interestingly, Jerome Powell also drew attention to the labor market. In his opinion, the Fed will lower the federal funds rate if the unemployment rate starts to rise rapidly. Bloomberg forecasts show that the unemployment rate in April will be 3.8%, but can the Fed know something that others don't? Could the EURUSD rally before an important event be the result of a new wave of rumors?
The euro was supported not only by an increase in the forecast of global GDP from the OECD, which is good news for pro-cyclical currencies, but also by neutral comments from members of the ECB Governing Council. One of the main "pigeons", the chairman of the Bank of Greece, Yannis Stournaras, now assumes that the ECB will cut the interest rate in 2024 not four, but three times. Chief Economist Philip Lane talks about a leisurely approach, about making decisions based on observing and analyzing the dynamics of inflation. However, in his opinion, a reduction in rates is still necessary, since prolonged inactivity can negatively affect the Eurozone economy.
From Philip Lane's point of view, although the Fed's actions may have an impact on the ECB's decisions, the main focus of the European Central Bank is on internal factors.
Markets expect the European Central Bank to act sooner than the Fed. This will allow the US dollar to strengthen its position in forex currency trading in the next three months. However, then, according to analysts' forecasts, by the end of July, the EURUSD will rise to the area of 1.07, and by the end of October to the level of 1.08.
Thus, differences in economic growth between the US and the Eurozone, as well as differences in the timing and speed of monetary expansion of the Fed and the ECB, continue to work on the side of the EURUSD bears. However, alarming signals have already been received about the slowdown in the American economy in the first quarter. Now, dollar supporters are anxiously awaiting the April report on the US labor market.
In the previous few months, the employment rate looked too strong. Forecasts by Bloomberg economists suggest a decrease in new jobs from +303 thousand to +242 thousand in April, but even this figure will remain significantly higher than the average before the pandemic. If the actual data turns out to be within the forecasts or slightly better, this may be a reason to sell EURUSD in the direction of 1.064 and 1.06. On the contrary, disappointing statistics will be a strong argument in favor of buying a pair.