The US dollar sinks, but a short-term bottom may be close (Daily analysis 06.09.2021)

Friday's US labour market report proved to be the final punch at hopes of a rapid and decisive normalisation of monetary policy. As a result, the US dollar selling re-gained momentum, and the EUR/USD pair touched 1.19.

In August, less than 250,000 new jobs were created outside of non-farm sector employment. This is a disappointing result when compared to the previous month which saw an increase of one million jobs and is clearly worse than forecast. The latest information on the condition of the economy, which is of key importance for the Fed, does not meet the criterion of "further decisive progress", which is required by the decision-makers to start tapering and sustain negative sentiment towards the dollar. The risk is that this was a "full stop" to the dollar's recent weakness, and the market will have to look for new impulses and positive trends in other currencies.

The dollar leaves the stage, the euro in the spotlight

Over the past two weeks, investors' eyes have been mainly focused on the United States. First, the central bankers' symposium in Jackson Hole was anticipated, then Friday's labour market report took the headlines. In the coming days, the situation will change - the most important event should be the meeting of the European Central Bank. The market will be looking for clues about the future of the crisis pandemic asset purchases. After the recent strong weakening of the dollar (the EUR/USD pair rose by over 2% and reached the level of 1.19), the risk of slowing down the positive trends for the common currency prevails. However, on the horizon of the end of the year, we expect further drift of quotations towards 1.20.