Published on 08.11.2021 12:00

The Euro tumbled to a new 14 month low in Friday’s trading session after a strong round of data from the US all but guaranteed the US Federal Reserve will begin the process of reducing their bond buying program as early as this month.

The latest key jobs figures hit the market from the US, starting with the non-Farm payrolls report which came in at 531,000 against analysts’ expectations for a figure of 450,000 and more than double the amount of last month’s reading of 194,000.

The Unemployment rate also performed well coming in at 4.6% against consensus for a number of 4.7% while the average hourly earnings jumped to 4.9%, up from 4.6% in September

With the latest booming jobs figures, the Fed will no longer be able to ignore the fact that rates will need to rise soon, maybe as early as next year, and this assumption sent the US dollar soaring against all the major currencies including the Euro which sank to a new 14 month low of $1.1512.

If the Fed starts dropping hints to the market about potential rate hikes, it will be one of the first Central Banks from the developed world to do so, and is the opposite view of the European Central Bank which was confirmed by ECB president Christine Lagarde who pushed back against market bets for a rate hike as soon as next October, and said it was very unlikely such a move would occur in 2022.

This was also backed up by European Central Bank chief economist Philip Lane over the weekend who noted  that high price growth is temporary and the central bank would not react to the current situation.

“We believe that next year bottlenecks will ease, and energy prices will decline or stabilize. This current period of inflation is very unusual, temporary, and not a sign of a chronic situation.” Mr Lane said.

Looking ahead today, the economic calendar is rather quite on both sides of the Atlantic so there is not much movement expected in the EUR/USD currency pair and traders will have to wait until tomorrow for the release of the Zew economic survey from Germany and the Producer price index from the US to see some volatility.

On the chart we can see the Euro was able to recover significantly after hitting a new yearly low on Friday and is now slightly up in today’s trading session and has once again found support at the $1.1553 level.

The market is now pricing in a reduction of the stimulus program from the Fed so the Euro’s price movements this week should be dictated by economic data from the Eurozone and any improvement should see the European currency grind higher.


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