EURUSD Drop Worsens, Rate Slips Near 1.1530 amid Stock Selloff

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Principal Points:

• The EURUSD pair slipped to a new low on Wednesday reaching a level last seen on July 22, 2020
• Global equities struggle to perform in October as the selloff renews momentum

What’s Moving in the Markets?

The EURUSD exchange rate has slipped to its lowest level since late July 2020. For a second straight day on Wednesday, the euro has been losing ground against a dollar dominating in forex markets. That said, the volatile EURUSD touched a session low of 1.1529 yesterday and is currently trading pressured near 1.1550.

In more detail, over the past month, the euro has barely had any positive sessions against the greenback. Since early September, the European currency has lost about 380 pips, or 3.2%, against the US dollar.

In the meantime, global stocks endured renewed jitters. On Wednesday, European bourses shed 1% or more, while US stocks barely made it in the green. On Wall Street, investors saw the Dow Jones dive over 450 points only to pare them and end in profit. In addition, the S&P500 and the tech-heavy Nasdaq Composite also reversed earlier losses and finished in the green.

US futures on Thursday indicate a higher open for stocks. Dow futures were higher by 0.3%, while S&P500 futures and Nasdaq futures were positive by around 0.4%, and 0.6%, respectively.

Why is Bitcoin Rallying?

The price of bitcoin, at the same time, pushed to a six-month high early on Thursday. In more detail, bitcoin jumped to a session high of $55,700 a coin amid increased buying momentum.

The leading cryptocurrency has been extremely positive this month, gaining about 30% since Oct. 1. Moreover, the entire crypto market cap has surged in value, topping $2.3tn.

The orange coin, along with the crypto space, has enjoyed strong tailwinds over the past few days amid brightening prospects for crypto. Regulators in the US, including the Fed, the Treasury, and the SEC, said they have no plans to ban crypto. In turn, this assuaged fears in the market and increased hopes that institutional investors will soon join the crypto space.

What’s the Big Picture for Traders?

The financial markets this week have been experiencing heightened volatility amid growing uncertainty for the economic outlook. On the one hand, investors are nervous about moving further into the fourth quarter in a high-inflation environment. Furthermore, the global slowdown in economic expansion has decreased risk appetite for stocks or other risky assets. As a result, this has led to an elevated demand for US dollars.

On the other hand, political jitters from Washington have knocked investor confidence. In more detail, the US government continues to look for ways to avoid a shutdown due to a potential default. On that note, Treasury Secretary Janet Yellen has urged lawmakers to act and raise the debt ceiling within two weeks. As a response, Republicans have offered to extend the debt ceiling into December. Presently, the US Treasury Department has enough cash to function until Oct. 18.

What to Watch in the Markets?

The US jobs report, slated for Friday, will be accompanied by increased volatility, particularly in the currency and commodity markets. That said, the US is expected to have added about 500,000 new jobs to its economy in September. The nonfarm payrolls, as the jobs data is called, is a key indicator of economic health and is keenly watched by traders and investors.

In addition, the unemployment report, arriving alongside the nonfarm payrolls, is projected to show unemployment declined to 5.1% from 5.2%.

Looking Ahead into the Day (EST times)

Today’s economic data is relatively lightweight but nonetheless important. The initial jobless claims in the US arrive at 08:30. In practice, the report measures the weekly number of first-time filings for unemployment benefits from the US government. Next, at 10:00, the Ivey PMI for Canada is expected to arrive.