Euro and Pound Struggle to Break Key Levels as Market Awaits Fresh Catalysts

The US labor market has delivered contrasting signals in September, complicating the outlook for employment trends and the Fed policy. The ADP report released on Wednesday revealed a robust addition of 233K private-sector jobs in October, significantly surpassing the consensus estimate of 115K. This strength suggests that businesses continue to hire aggressively, potentially fueling consumer spending and economic growth.
Conversely, the JOLTS report indicated that job openings fell to 7.44 million in September, the lowest level in more thantwo years. This decline could signal a cooling in labor demand, possibly foreshadowing a slowdown in future hiring.
The divergence between the strong ADP numbers and the weakening JOLTS data presents a conundrum for the Federal Reserve. A resilient labor market supports the case for maintaining or even tightening monetary policy to prevent overheating and inflationary pressures. However, signs of slowing job openings may prompt caution, as they could indicate emerging weaknesses in the employment landscape.
Market expectations, as reflected in interest rate futures, now imply a 96.3% probability of a 25 basis point rate cut by the Fed at its upcoming meeting, up from 92% earlier this week. However, the likelihood of an additional cut in December has decreased, suggesting that the market anticipates a more measured approach from the Fed amid mixed data.
The GDP data showed that the U.S. economy expanded at an annualized rate of 2.8% in the third quarter, slightly below the 3% forecast but outperforming other major economies.
Inflation metrics from the report presented a more nuanced picture. The GDP Price Index rose by 1.8% in Q3, down from 2.5% previously, indicating that price pressures are moderating. However, the Core Personal Consumption Expendituresindex increased by 2.2%, slightly above expectations. Persistent consumer spending, as evidenced by the PCE, suggests that demand-driven inflation could remain a concern.
In Germany, inflation has accelerated more than anticipated. The Consumer Price Index rose to 2% year-over-year in October, exceeding the expected 1.8%. The Harmonized Index of Consumer Prices (HICP), which the ECB closely watches, surged to 2.4% from 1.8%. This uptick may pressure the ECB to reassess its accommodative stance, especially if inflationary trends persist across the Eurozone.
The EUR/USD pair attempted to recover toward the 1.0850 resistance but faced a strong rejection, as indicated by the latest daily candle. This failure to sustain an upward move reinforces the bearish sentiment in the pair, suggesting that the market lacks momentum for an upside reversal at this stage. A decisive downside breakout below the rising support line may be necessary to attract fresh buyers from lower levels, potentially targeting the 1.0670 and 1.0600 areas. Until then, the overall bias remains bearish:

The British Pound has weakened ahead of the U.K.'s Autumn Forecast Statement. Anticipated fiscal measures, including tax increases and heightened investment spending, could expand the deficit, stoking inflationary fears. Consequently, market participants are re-evaluating expectations for the Bank of England's monetary policy. While market consensussuggests a widely anticipated 25 basis point rate cut at the November 7 meeting, fiscal developments may influence the BoE's future decisions.
On the technical side, the GBP/USD pair remains trapped between the 1.3000 resistance level and a key medium-term ascending trendline, reflecting a lack of clear directional momentum:

Recent upside attempts have also failed to break decisively above 1.3000, indicating that bullish strength is limited at this stage. A further downside move may be necessary to test lower support levels before the pair gathers enough momentum for a potential reversal. Until a breakout occurs, the bias leans toward continued consolidation or potential downside exploration.
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