ECB Decision and US Jobs Data Kick Off September.

The first week of the new month is set to be a significant one for foreign exchange markets, featuring a central bank policy decision from the ECB and the influential US employment report. Markets are digesting last Friday’s key US inflation data, which came in softer than expected and solidified the case for a Federal Reserve rate cut this month. Trading is expected to be subdued today, however, as US markets are closed for the Labor Day holiday.

The Pound Sterling is trading in a relatively tight range as the market awaits fresh catalysts. This week's final business activity surveys will be monitored for an up-to-date health check on the UK economy. However, with no major domestic data scheduled, the Pound's direction will largely be determined by the major events in the Eurozone and the US and the resulting shifts in broader market sentiment.

The US Dollar begins the holiday-shortened week on the back foot following last Friday's inflation report. The data reinforced the market’s view that the Federal Reserve will begin its easing cycle imminently. The major test for the Dollar this week will be Friday's Non-Farm Payrolls report. Another soft reading would confirm the cooling labour market trend, while a surprisingly strong number could challenge the current dovish narrative.

The Euro is in focus this week with the European Central Bank set to announce its latest monetary policy decision on Thursday. Following last week's somewhat sticky inflation data from the region, investors will be paying close attention to the ECB's statement and press conference for clues on the pace of future rate cuts. The decision will be a key driver for the single currency.

Events to Watch This Week:

⦁ Monday, September 1: US Labor Day Holiday (US Markets Closed) & Global Manufacturing PMIs

⦁ Wednesday, September 3: Global Services & Composite PMIs

⦁ Thursday, September 4: European Central Bank (ECB) Interest Rate Decision & Press Conference

Friday, September 5: US Non-Farm Payrolls Report (for August)

This pivotal week will provide crucial insights into the policy paths of two of the world's major central banks. The ECB's guidance on Thursday, followed by the critical US jobs data on Friday, will likely set the trading tone for the month of September and could introduce significant volatility into the market.

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