Congress is expected to vote on whether the US should launch air strikes against Syria in a move that could spark some panic across financial markets until investors weigh what the action could mean for global economic growth, oil prices and US monetary policy.
The Syrian crisis continues to escalate but although safe haven buying could buoy the US dollar significantly in the coming days, the greenback opens sharply lower after Friday’s US non-farm payrolls data missed market estimates. Cable remains trading near one-and-a-half-month highs as some investors doubt that the Federal Reserve will announce a stimulus taper in a critical policy announcement.
The sterling starts near eight-month highs against the euro after the European Central Bank talked about lower interest rates. However, the pound could face profit-taking if UK unemployment data supports the Bank of England’s dovish “low rates for longer” pledge.
The euro is finding gains difficult to come by after the ECB’s interest rate decision while Italian political risks and upcoming elections in Germany remind investors of the need for concrete solutions to the sovereign debt crisis.
Sterling
The pound surged to an eight-month high against the euro after disappointing US jobs data boosted demand for the UK currency while the European Central Bank’s dovish policy announcement weighed on the single currency. Markets will examine RICS UK house price survey, forecast to show a sharp increase in house prices last month, which may further underline optimism about Britain’s economic recovery.
US dollar
The US dollar may struggle to gain traction after tumbling subsequent to a much-slower pace of US jobs growth clouding the outlook for US monetary stimulus. Going into key US non-farm payrolls data, the US dollar had risen to seven-week highs overall on bets that 180,000 new jobs creation in the US economy would allow the Federal Reserve to starting reducing stimulus. However, jobs growth in August was 169,000 while July’s figures were marked down sharply.
Euro
As the build-up to German elections continues, the need for more funding in peripheral eurozone economies is becoming more evident. Meanwhile, the Italian Government is still tackling the Berlusconi-risk, reminding investors that Europe still need to produce concrete solutions to its debt crisis such as the banking union. Euro area finance ministers will meet and may respond to these concerns.