European session review: USD mostly lower as supportive Fed's policy and positive China's PMIs in focus

USD weakened against most other major currencies in the European session on Monday as expectations of lower interest rates for longer in the U.S. continued to support market sentiment. The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.19% to 92.20.

The U.S. Federal Reserve Chairman Jerome Powell laid out an accommodative policy change last week, which is believed to result in inflation moving slightly higher and interest rates remaining lower for longer. 

Positive PMI data out of China added to the positive sentiment as well. The National Bureau of Statistics (NBS) reported that China's non-manufacturing purchasing managers' index (PMI) rose to 55.2 in August, up from 54.2 in July. That pointed to the fastest growth in the service sector since January 2018. Economists had forecast the reading to remain unchanged at 54.2.

Meanwhile, China's manufacturing sector continued to expand in August, albeit at a slower pace. The NBS' Manufacturing PMI stood at 51.0 in August 2020, marginally down from 51.1 in the previous month. Economists had forecast the index to edge up to 51.2. 

Market focus is gradually shifting to the U.S. payrolls for August, set to be released on Friday. Economists are looking for a non-farm payrolls print of 1.425 million and an unemployment rate decreasing to 9.8%.