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Clarida stokes dollar buying

The EURUSD pair closed lower on Wednesday, August 4, down 0.23% to 1.1837. Volatility escalated ahead of Friday's NFP report on the back of mixed macro data, as well as remarks by Fed Vice Chair Richard Clarida.

Buying sentiment faded after yesterday’s release of unexpectedly weak ADP private payrolls report. The report clashed with the US ISM non-manufacturing PMI, which overshot market expectations.

The July ADP reading came in at 330k, falling short of the 695k consensus forecast and the previous print of 680k.  The ISM report stood at 64.1 in July, up from 60.1 in June.

The dollar rallied after Richard Clarida claimed that conditions for a rate hike could be met in late 2022, paving the way for monetary policy action in early 2023. St. Louis Fed President James Bullard and the New York Fed President Robert Kaplan also delivered speeches. In the upshot, the key pair slid from 1.1900 to 1.1833 (-67 pips).

Today’s macro agenda (GMT+3)

  • 11:30 UK: construction sector PMI (July)
  • 14:00 UK: BoE interest rate decision
  • 15:30 US and Canada: trade balance (June); US: weekly initial jobless claims

Current outlook

At the time of writing, the single European currency was trading at 1.1836. The price action has been hovering in a narrow range for the past 14 hours. Major currencies are showing choppy performance. Today’s leaderboard is topped so far by the aussie dollar (+0.24%) and the kiwi dollar (+0.17%).

In line with the daily TF, the bears have opened the way to 1.1800 and then 1.1775. That said, it remains unclear whether or not the bears will have sufficient conviction today following yesterday’s lackluster ADP report. Ahead of Friday's NFPs, the price action could be stuck around 1.1835 for a while. A rebound to 1.1864 would jolt the bulls into buying the euro, despite Clarida's remarks yesterday.

With uncertainty holding sway on the market until tomorrow’s jobs report, today market participants will shift their focus to a BoE meeting. We advise FX players to zero in on EURGBP cross dynamics. A volatility surge is expected after the rate decision comes out. If the cross declines, EURUSD will sink to new lows.

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