EUR/USD corrects below 1.1000 amid caution ahead of US labor market data

• EUR/USD drops below 1.1000 amid cautious market mood ahead of US Employment data.
• In spite of downgraded ratings by FITCH, the US Dollar Index has rebounded after a corrective move to near 102.00.
• Outperformance by Eurozone in the April-June quarter on GDP parameter could force the ECB to raise interest rates.

The EUR/USD pair faces selling pressure above the psychological resistance of 1.1000 in the Asian session. The major currency pair comes under pressure as investors turn cautious ahead of the United States labor market data, which will be published at 12:15 GMT.

S&P500 futures posts significant losses in Tokyo, portraying a cautious market mood. US equities were under pressure on Tuesday as credit rating firm FITCH downgraded the United States economy. FITCH downgraded US ratings from ‘AAA’ to ‘AA+’ citing concerns about extended spending in forward years.

In spite of downgraded ratings, the US Dollar Index (DXY) has rebounded after a corrective move to near 102.00. The US Dollar Index rebounded on Tuesday despite a decline in US Job Openings and weak Manufacturing PMI data. US JOLTS Job Openings data were released at 9.582M against the prior release of 9.62M.

Meanwhile, US Manufacturing PMI contracted straight for the ninth month, landing at 46.4 below expectations of 46.8. Contrary to that, Factory Orders were recorded at 47.3 and outperformed expectations of 44.0.

On Wednesday, US Employment data will be in focus to be reported by the Automatic Data Processing (ADP) agency. Market consensus is for an increase in private payroll of 188,000; such a reading would be the slowest growth in four months and would follow the surprise of June that showed a super strong increase of 497,000.

On the Eurozone front, inflationary pressures deflated in July by 0.1% but outperformance in the April-June quarter on GDP parameters could force the European Central Bank (ECB) to raise interest rates further. Later this week, investors will keep an eye on Retail Sales data. An impression of solid consumer spending momentum would elevate hawkish ECB bets.