FOREX Fundamental Analysis for November 3, 2023
Investors believed in the Fed's latest act of monetary restraint, especially since the head of the regulator has repeatedly stated the need to raise the rate to 5.75% this year. However, the recent Fed meeting and even more so Jerome Powell's press conference were a gift for EUR/USD buyers.
Even the probability of a rate hike at the December meeting fell from 39% to 20%. Moreover, during the Fed Head's conference the figure reached 14%, which allowed EUR/USD to rise to 1.066. But caution took its toll.
Nevertheless, the December act of monetary restriction has many influential supporters. In particular, William Dudley, the head of the Federal Reserve Bank of New York, believes that the Fed got a great position. After the weakening of financial conditions, much less effort will be needed to raise the rate in December.
At the same time, investors are tired of guessing on the daisy-chain "will they raise - will they not raise" and now they are more interested in the question of how long rates will remain at high levels? This largely depends on the performance of the U.S. economy. It has been doing quite well until now, especially if we remember that GDP grew by 4.9% in the third quarter. Optimists say that the Fed's monetary restraint will no longer be able to slow down the growth of the United States economy.
Friday's labor market report will help formulate an objective assessment of economic growth. It can be said that today will be a day for forex traders who like to trade on the news. According to the Wall Street Journal forecasts, employment growth will amount to 170 thousand, unemployment will remain at 3.8%, average wage growth will slow down from 4.2% to 4.0%. If the actual values are worse than expected, the yields on treasuries will fall and pull the dollar with them. In this case, we will build up long positions. If the labor market is stronger than forecast, EUR/USD will continue to consolidate in the range of 1.05-1.07.