No Major Data on Monday, Sentiment Seems Fragile

As of writing, the EURUSD pair traded just 15 pips above parity, while GBPUSD declined to 1.18, and USDJPY was spotted near 137.

Due to the lack of significant US economic data on Monday, traders may choose to stay on the sidelines rather than make aggressive trades, likely resulting in low volatility on Monday.

Central banks in focus

Early on Monday, the People’s Bank of China slashed its benchmark interest rates for a second week in a row in an effort to boost the economy of the nation, which has been hit hard by a real estate crisis and an increase in COVID-19 cases.

The PBOC has decreased its Prime Lending Rate (PLR) for one year and five years by 5 basis points (bps) and 15 bps, respectively.

In other news, investors are eyeing Fed Chairman Jay Powell’s statement in Jackson Hole, Wyoming, on Friday in anticipation of probable answers about the potential heights to which US interest rates may rise and the length of time they may need to remain there in order to keep inflation under control.

Elsewhere. the market anticipates a rate increase of 54 basis points at the meeting on September 8th. If the ECB wants to provide some support for the EUR/USD, it should start talking about the possibility of more aggressive rate increases. This week in northern Europe, be on the lookout for any hawkish remarks.