EUR/USD has edged lower in the Wednesday session. Currently, the pair is trading at 1.1347, up 0.03%. On the release front, there are no major U.S. events on the schedule. In the U.S., the focus will be on employment numbers for the remainder of the week. ADP nonfarm payrolls are expected to remain unchanged at 179 thousand, while unemployment claims are forecast to continue climbing, with an estimate of 220 thousand. On Friday, the eurozone releases CPI reports, while the U.S. will post nonfarm payrolls and wage growth. As well, ISM Manufacturing PMI is forecast to dip to 57.7 points.
The euro took a plunge on Wednesday, declining 1.0 percent. The catalyst for the sharp drop was a surge by the Japanese yen, as investors remain nervous about the global economy and flocked to the yen, which posted strong gains against the dollar, with other currencies such as the euro feeling the effect. The markets are thin on liquidity this week, and with Japanese banks closed for most of the week, the yen’s movement was even more pronounced. The dollar has traditionally been a safe-haven asset, but this role is being re-evaluated, with some analysts calling the yen the “safer safe-haven”. If investor jitters continue, the euro could resume its downward slide.
After four rate hikes in 2018, the Federal Reserve will be drastically easing up on raising rates in 2019. Just a few months ago, there was heady talk of three or four rate hikes in 2019, but the Fed made an abrupt U-turn, saying the “neutral rate range” had been reached. Analysts expect one rate hike in 2019, as this year’s hikes and the global trade war have lessened the pace of expansion in the U.S. economy. According to the CME Group, the likelihood that the Fed will stay on the sidelines in January and March stands at 98% and 93%, respectively. This dovish stance from the Fed could weigh on the dollar in the coming months.
