At the close on Friday, the euro attempted a recovery versus the dollar, and the pound showed a similar move. All focus was on US data, which allowed traders to exhale slightly at the weekend. The respite was short, and the broader picture remains unsatisfying. Asia has again put the euro back under pressure this morning, so the key question is whether eurozone data will be enough to close the overnight gap.

The impetus for Friday's bounce was the US September jobs report. Nonfarm payrolls rose by only 29,000, according to the US Department of Labor, while the average monthly gain over the previous 12 months was about 45,000. Revisions were even more telling. July was revised from +21,000 to -10,000 and August from 162,000 to 133,000, meaning the market lost roughly 60,000 jobs it had previously counted as created. The euro and the pound benefited in the short term, while the dollar lost a strong argument for imminent and aggressive tightening. By comparison, August began with a 55,000 consensus and ended with a strong print, so the current cooling is notable.

Wage growth is also worth highlighting. Average hourly earnings rose just 0.1% month-on-month to $37.81, versus 0.3% in August. That gives the Fed additional room for calm, while consumers lose ground: with wages rising so slowly, spending will be restrained and may eventually ease inflationary pressure. Still, policymakers do not have much slack. In August consumer prices rose 0.4% month-on-month, energy costs climbed 2.1%, and Brent traded around $105–107 in mid-September. At that oil price I expect inflation to continue upward, which sooner or later will feed through into second-round effects that worry both the Fed and the ECB.

Today, the euro returned to pressure and fell about 0.8%, making a fresh low not seen since May 2025. Hedge funds have been selling euros since mid-last week amid political instability in Europe, dealing the main blow. France unsettled markets at the weekend, and now Spain has joined the turmoil. The dollar benefits and the euro suffers, but a weak euro has a downside: oil and gas are priced in dollars, so every percentage drop in the euro makes energy more expensive for Europe. That plays into the hands of ECB hawks, who after the September 10 rate increase already warned of second-round effects. German exporters, whose shipments to the US rose 28.3% year-on-year in July, remain perhaps the sole beneficiaries of a weak euro.

Why was the sell-off so sharp? It is the mechanics of the Asian session. Spot selling triggered option barriers, which in turn added option-related selling. This is a classic chain reaction in a thin market, where each tranche of selling sparks the next and liquidity to cushion the move is absent. A recovery in the first half of the day is possible, and fundamental releases could help.

Looking at the economic calendar, the first items are final services PMI readings for Italy, France, Germany, and the eurozone. The eurozone is expected to confirm the flash 53 reading for September—recall 51.7 in July and 51.6 in August. An upward revision could spur active euro buying and fully erase the Asian gap. Historically August showed Germany's best month in four years, while France contracted for the eighth consecutive month, so a weak French print could worsen the picture and reinforce political negativity. Next are eurozone PPI figures, expected to rise 1.9% in August after 1.6% in July. A beat would give the ECB another reason to tighten further and thus support the euro via rate expectations, while weighing on industrial margins. After the September meeting, the market priced about a 70% chance of an October hike, and today's releases could move that probability either way.

The UK report looks more worrying. Services PMI was 52.1 in July and 52.5 in August; September is forecast at 51.7. A worse-than-expected print would add pressure on the pound, since services employment in Britain has been contracting for 23 months and fiscal uncertainty ahead of Chancellor Hunt's autumn statement remains. The pound trades in a sideways channel and does not simply follow the euro, though it reacts to euro weakness. It has not broken the channel's lower boundary yet, which keeps the prospect of sideways trading alive rather than an immediate slide.

On the US side, a strong S&P Global services reading of 58.7 is due—a very solid number that should not trouble the dollar. Then comes the ISM non-manufacturing index, forecasted at 55.1 after August's 55.4. A beat there could return the initiative to the dollar against the euro and pound. Watch the prices component, which in August hit 72.6—the highest since August 2022—and the employment subindex, which remained below 50.

Technically, on the hourly EUR/USD chart, a new support sits at 1.1165; a false break there could trigger a correction to 1.1210. If European data are strong, I expect the first aggressive bear move at that level, so only a false break of 1.1210 would be a trigger for shorts targeting a return to 1.1165. A break and close below that area would push the euro to 1.1133, with a more distant target at 1.1097, where I would buy the bounce for 30–35 pips. Longs from 1.1133 or 1.1165 are only on false break setups. If the Asian decline is fully retraced and the pair rises above 1.1210, a break and hold above that band would justify adding longs toward 1.1259 and the formation of a new sideways channel. From 1.1259 I would look to sell rebounds for 20–25 pips.

GBP/USD remains rangebound. 1.3180 is the reference for buying false breaks aimed at the channel midpoint of 1.3223. A break and hold above that would open a run to 1.3265, and I would only initiate shorts if a hold fails. Shorting from 1.3223 is acceptable on a false breakout targeting 1.3180. A break of the lower channel boundary would intensify pressure on the pound and open a larger sell-off toward 1.3137 and 1.3097, where I would look to buy the bounce for 25–30 pips. Longs from 1.3137 or 1.3180 are also false break only. I would sell a sharp rally to 1.3307—unlikely in my view—for 20–25 pips.

I lean toward the dollar retaining the edge until European releases, and any euro recovery will be capped by political risk in France and Spain. Weak US employment offers a pause but does not change the inflation arithmetic, and as long as oil remains expensive, the Fed cannot relax. I would risk saying that a strong eurozone PMI could restore morning losses, but a strong US ISM would quickly return the dollar to the frontline. The pound looks weaker in this mix, though the channel bottom still holds. Near-term direction will be shaped by the October ECB meeting and the Fed meeting a few days before the November 3 election; until then the market may live mainly by European politics and oil.