Dollar Slows Gains on Jobs Data, Euro Gains on German GDP

The U.S. dollar eased from recent highs on Wednesday, pausing its rally as markets awaited key macroeconomic data that could impact expectations for Federal Reserve rate cuts.

Dollar Eases Amid Labor Market Data

The dollar has strengthened recently, bolstered by signs of economic resilience that have led traders to reconsider the pace of Federal Reserve rate cuts. Labor market data has been a central focus, with Tuesday’s report showing U.S. job openings in September were lower than expected, reaching their lowest level since January 2021.

This softer labor data pressured the dollar overnight, as a labor market slowdown could support the Fed’s case for another rate cut at its upcoming November meeting. Markets are now watching for the ADP employment report, due later Wednesday, followed by weekly jobless claims on Thursday and the monthly payroll report on Friday.

Additionally, third-quarter GDP growth figures are expected today, with forecasts suggesting continued robust expansion in the U.S. economy.

German GDP Boosts the Euro

The EUR/USD rose 0.3% to 1.0850, lifted by better-than-expected third-quarter GDP growth data from Germany. Germany’s gross domestic product rose 0.1% in the third quarter compared to the previous quarter, defying expectations of a slight contraction.

On Tuesday, Germany’s Chamber of Commerce and Industry projected a 0.2% contraction for the eurozone’s largest economy in 2024, revising its May forecast of stagnation. Meanwhile, the European Central Bank has already cut rates three times in 2024 and may lower them again at its next meeting.

The GBP/USD pair dipped to 1.3011 ahead of the British budget, the first under the new Labour government. Finance Minister Rachel Reeves is anticipated to raise both taxes and spending, which remains a cautious approach two years after the market turmoil triggered by former Prime Minister Liz Truss’s tax-cut plans.

Yen Holds as Bank of Japan Meeting Approaches

The USD/JPY pair declined 0.2% to 153.12 after hitting 154 overnight. The yen’s recent weakness comes as the Bank of Japan is expected to keep rates steady at its meeting on Thursday. Rising political uncertainty may complicate the BoJ’s plans for further rate hikes after two increases earlier this year.

The USD/CNY pair slipped 0.1% to 7.1241, with market attention focused on China’s upcoming Purchasing Managers Index data. Additionally, China’s National People’s Congress, scheduled for early November, is expected to provide further details on plans for increased fiscal spending.