Finally, the U.S. dollar returned to its former strength pre-NFP with also EUR/USD joining the downward trend. The euro gave way to the strengthening dollar and thus, EUR/USD dropped below 1.17 after gains were capped at 1.1780.
The main topic in the market was however the fall of the British pound which came under severe downward pressure after chaotic U.K. politics put the country’s outlook on very shaky foundations. The pound came under selling pressure after UK Prime Minister Theresa May put in a disastrous performance at the annual conference of her Conservative Party. Her speech was disrupted by prankster and then by a coughing fit. That disastrous speech weakened her position as PM while the idea of replacing May in the middle of Brexit negotiations is widely viewed with horror. A replacement by Brexit hardliner Boris Johnson could make a deal with the EU harder rather than easier to reach.
The GBP/USD fell below important support-levels at 1.3150 and 1.31 and could now be headed towards a test of 1.30.
Today, all eyes will be on the Non-farm payrolls report scheduled for release at 12:30 UTC.
The U.S. September Employment report is expected to show a weaker reading due to the impact of hurricanes on southern states. Meanwhile, comments from Fed officials reinforced optimism ahead of the jobs report, saying Fed policymakers “pencil in” a rate hike in December and three hikes next year. The priced-in probability of a December rate hike is currently at 75 percent.
If payrolls beat expectations, the greenback will receive a boost and could further rise against the euro and pound.
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