FX.co ★ The US labor market will leave the Federal Reserve with no options

The American dollar will not give up its leadership, as strong macroeconomic statistics and a hawkish sentiment from the Federal Reserve System allow the greenback to feel quite confident. This is substantiated by recent remarks from John Williams, President of the Federal Reserve Bank of New York, and recent labor market data from ADP. Williams expressed during an interview that it's imperative to continue manipulating interest rates to drive inflation down to 2%

.

"We may need to allocate some time to evaluate and collect more information before we proceed. Based on the current information, we don't believe we're done," said Williams, alluding to the fundamental and macroeconomic data that the Federal Reserve possesses.

ADP Research Institute released data today indicating that American firms created a much larger number of jobs in June than anticipated, which underlines the persisting vigor of the labor market. The increase was reported to be 497,000, more than twice the average forecast made by economists.

It should be remembered that the committee decided to hold interest rates steady last month after ten successive increases, thereby allowing themselves more leeway to observe the economic reactions to higher borrowing costs. Recent quarterly predictions from the Federal Reserve and the minutes from their meeting suggest that a further increase of 50 basis points will be required within the year.

Williams stated that future decisions about raising rates would be wholly data-dependent, highlighting that recent economic indicators have outperformed expectations. He also noted that the incoming data corroborates the assertion that more work is ahead for the Fed.

Just last week, Jerome Powell, Chair of the Fed, stated he wouldn't dismiss the possibility of an interest rate increase in the upcoming two meetings. Most investors anticipate a quarter-point rate hike by the US Central Bank in their meeting scheduled for July 25 and 26 this month.

The most recent data on inflation necessitates this course of action, given that the slowing pace of growth needs to meet politicians' expectations. Despite the Personal Consumption Expenditures price index increasing at its least rapid annual pace in the past two years this May, the main concern for policymakers lies in the core prices, excluding food and energy. These core prices rose by 4.6% over the 12 months leading up to May, in contrast to 3.8%.

Williams acknowledged the persistently high core inflation but highlighted the strides made to curb the overall inflation rate.

Regarding the EUR/USD's technical perspective, buyers must surpass the 1.0860 level and establish their stronghold to regain dominance. This would enable them to move closer to the 1.0900 and 1.0930 marks. While reaching the 1.0975 level from here is possible, it would be difficult without the backing of new favorable data from the Eurozone. Should the trading instrument depreciate, I foresee major buyers taking decisive steps only when it hits around 1.0835. If this area remains vacant, it might be advisable to wait for the minimum to fall to 1.0780 or to initiate long positions starting from 1.0740.

The GBP/USD technical outlook shows a sustained demand for the pound, signifying the continuation of the bull market. The pair's potential ascent can be expected after gaining control over the 1.2735 mark, as breaching this range will boost optimism for a further recovery to the 1.2770 level. Beyond this point, a more pronounced spike in the pound to the 1.2805 level could be discussed. However, if the pair were to decline, the bears would attempt to seize control over 1.2690. Succeeding in this could blow the bullish stance, plummeting GBPUSD to a low of 1.2660, with a chance to further decline to 1.2620.