EUR/JPY: Markets await Nonfarm Payrolls as next likely catalyst

• Both key ISM surveys have pointed to a major slowdown in US growth rates.
• The US Dollar and US stocks are bleeding out – supporting the Yen.

Once again, the US Dollar and US stocks are bleeding out on economic concerns while  the ISM non-manufacturing index has come in at 52.6, the weakest reading for over three years, giving a lift to the Yen. EUR/JPY is currently trading at 117.40 having marked a fresh two-week low of 117.07.  

EUR/JPY is highly  correlated to the performance of global equities and investors are waking up and smelling the coffee on evidence that, indeed, trade wars have had a negative impact on the world economy and it would appear that the US is by no means isolated from the slow-down, which has been evident in this week in US economic data.

Both key ISM surveys have pointed to a major slowdown in US growth rates and analysts at ING Bank are forecasting a US GDP growth outcome of just 1.3% for 2020 versus a consensus estimate of 1.8% “with the clear implication that the Federal Reserve has more work to do to support the economy”.

US Dollar and stocks will be  vulnerable to slide further on a negative surprise

The prospects  of a rate cut from the Federal Reserve are on the up and markets are responding in kind. However, this time around, the Fed will be seen to have gauged the outlook wrong and we are seeing the markets react – What is of most concern is a  sharper than expected global  downturn could well expose persistent underlying macroeconomic imbalances and  the next key data will come from the US Nonfarm payrolls tomorrow of which the US Dollar and stocks will be  vulnerable to slide further on a negative surprise – supportive of the Yen.

EUR/JPY levels