EUR/USD begins September on softer foot above 1.0000, US PMI, NFP eyed

• EUR/USD struggles to extend three-month downtrend around nearly two-decade low.
• Markets turned dicey but hawkish central bankers, firmer EU inflation data kept bears in driver’s seat.
• Geopolitical, covid news also exerted downside pressure ahead of the key US data.
• German Retail Sales, US ISM Manufacturing PMI could offer intraday directions.

EUR/USD seesaws around 1.0050, probing a three-day rebound from the yearly low, after declining for three consecutive months. The pair’s latest inaction could be linked to the anxiety ahead of the key data/events while the daily gains could be attributed to the hawkish EU data versus softer US numbers. Even so, hawkish Fed bets and fears of recession kept the quote pressured.

As per the first readings of the Eurozone Harmonised Index of Consumer Prices (HICP) released for August, the inflation in the bloc rose to 9.1% YoY versus 9.0% expected and 8.9% prior. On Tuesday, Germany’s HICP for the stated month grew 8.8% while matching expectations, versus 8.5% prior.

Following the data, the European Central Bank (ECB) “urgently needs to act decisively next week,” the central bank’s Governing Council member and German central bank head Joachim Nagel said on Wednesday. “We need a strong rate hike in September,” the policymaker added.

Additionally, Germany’s Chancellor Olaf Scholz said that the government will present the next relief package soon.

On the other hand, US ADP Employment Change rose by 132K versus 288K expected and 270K prior. However, the average wage increases in the US in August were 7.6% y/y and the same kept the Fed policymakers hawkish.

Cleveland Federal Reserve Bank President Loretta Mester said on Tuesday that she was not anticipating the Fed to cut rates next year, as reported by Reuters. The policymaker also stressed that inflation must be brought under control, even if it means a recession. Restoring stability to consumer prices is now the clear priority for many key central banks, and with inflation so strong, that will come at the expense of growth. 

It should be noted that the energy crisis in Germany and the fears of the US-China tussles, recently over Taiwan, join covid woes in China to also underpin the US dollar’s safe-haven demand.

Amid these plays, Wall Street closed with losses while the US 10-year Treasury yields rose the most in two weeks while rising to the highest level since late June.

Moving on, Germany’s Retail Sales for August and the US ISM Manufacturing PMI could entertain the EUR/USD traders ahead of Friday’s US Nonfarm Payrolls (NFP).

Also read: US ISM Manufacturing PMI Preview: Slowing growth or recession?

Technical analysis

Although 0.9900 puts a short-term floor under the EUR/USD prices, July’s low near the 1.000 threshold precedes a downward sloping trend line from February, near 1.0190, to restrict the pair’s upside momentum.