- EUR/USD jumps towards 1.0900 as the US dollar depreciates sharply following a delicate US NFP report for July.
- Demand for labor in the U.S. appears to have fallen significantly and wage growth has slowed.
- The euro failed to capitalize on growing doubts about market expectations of two more ECB interest rate cuts this year.
EUR/USD is climbing near resistance at the 1.0900 round in North American trading on Friday. The major currency pair is rising as the United States (US) Nonfarm Payrolls (NFP) report for July showed signs of significant cracks in the resilient labor market conditions. The report showed that U.S. employers hired 114,000 up-to-date workers in July, below expectations of 175,000 and the prior hiring of 179,000, revised down from 206,000.
The unemployment rate rose sharply to 4.3% from estimates and an earlier reading of 4.1%. Also, slower growth in average hourly earnings, a key measure of wage growth that drives consumer spending and ultimately influences pricing pressures, eased concerns about continued price pressures. On a year-to-date basis, wage growth slowed to 3.6% from expectations of 3.7% and an earlier reading of 3.8%, revised down from 3.9%.
Weak labor demand in the U.S. weighed heavily on the U.S. dollar (USD) as it raised expectations that the Federal Reserve (Fed) would start cutting interest rates in September. The U.S. Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, fell to nearly 103.30. The outlook for the U.S. dollar was already negative due to a series of delicate economic data in the U.S./
The U.S. ISM Manufacturing Purchasing Managers Index (PMI) report for July on Thursday showed factory activity unexpectedly contracted at a faster pace to 46.8. Economists had estimated the Manufacturing PMI would shrink at a slower pace to 48.8 from June’s reading of 48.5. Additionally, initial jobless claims for the week ended July 26 were at an 11-month high. The number of people filing for unemployment benefits for the first time was higher at 249,000, compared with an estimate of 236,000 and an earlier release of 235,000.
Daily Market Factors Review: EUR/USD Strengthens, US Dollar Falls
- EUR/USD jumps near the 1.0900 round level in Friday’s New York session. The common currency pair is strengthening after unfavorable US NFP data, which raises expectations for a rate cut. Meanwhile, the Fed was already leaning toward a change in policy direction to normalization in September.
- The Fed kept interest rates unchanged at 5.25%-5.50% on Wednesday, but issued dovish guidance, in line with expectations. Fed Chairman Jerome Powell said: “If we see inflation declining roughly in line with expectations, growth remains fairly strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting,” Reuters reported.
- Across the Atlantic, the euro is struggling to recover despite a warmer-than-expected preliminary harmonised index of consumer prices (HICP) in the eurozone in July. The headline HICP unexpectedly rose to 2.6%, while economists had expected the inflation rate to fall to 2.4% from June’s reading of 2.5%. The core HICP, which excludes volatile items such as food, energy, alcohol and tobacco, rose evenly by 2.9%, compared with expectations of 2.8%.
- In addition, preliminary growth in the aged continent’s Gross Domestic Product (GDP) in the second quarter was higher than expected. The eurozone economy grew steadily by 0.3%, while investors expected a slower pace of growth of 0.2%.
- The scenario of stubborn inflation and steady growth is negative for market expectations for interest rate cuts. Financial markets currently expect the European Central Bank (ECB) to cut its key lending rates twice this year. A few ECB policymakers are satisfied with market expectations, while others are refraining from committing to a specific path of rate cuts.
Price in euros today:
PRICE Euro Today
The table below shows the percentage change in the Euro (EUR) exchange rate against the major currencies traded today. The Euro was strongest against the US Dollar.
| EUR | USD | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| EUR | 0.95% | 0.33% | 0.03% | 0.72% | 0.37% | 0.46% | 0.14% | |
| USD | -0.95% | -0.63% | -0.95% | -0.23% | -0.59% | -0.49% | -0.82% | |
| GBP | -0.33% | 0.63% | -0.32% | 0.40% | 0.02% | 0.14% | -0.17% | |
| JPY | -0.03% | 0.95% | 0.32% | 0.68% | 0.30% | 0.39% | 0.09% | |
| BOOR | -0.72% | 0.23% | -0.40% | -0.68% | -0.36% | -0.27% | -0.57% | |
| AUD | -0.37% | 0.59% | -0.02% | -0.30% | 0.36% | 0.12% | -0.23% | |
| NZD | -0.46% | 0.49% | -0.14% | -0.39% | 0.27% | -0.12% | -0.30% | |
| CHF | -0.14% | 0.82% | 0.17% | -0.09% | 0.57% | 0.23% | 0.30% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Technical analysis: EUR/USD is approaching the upper boundary of a symmetrical triangle
EUR/USD is recovering sharply after discovering robust buying interest near the 200-day exponential moving average (EMA) that is trading around 1.0835. This has improved the short-term prospects of the common currency pair. The major pair continues to trade inside a symmetrical triangle formation on the daily chart, showing a sideways trend. The aforementioned chart pattern indicates a edged drop in volatility that is likely to continue for some time amidst the lack of clear breakout or breakdown signals.
The 14-day Relative Strength Index (RSI) is back near 60.00. If the RSI breaks through 60.00, it will signal a rally.
Economic indicator
Non-farm wages
The Nonfarm Payroll Report shows the number of up-to-date jobs created in the United States during the previous month by all nonfarm payroll establishments; it is published by U.S. Bureau of Labor Statistics (BLS). Monthly changes in payrolls can be extremely volatile. This number is also subject to robust revisions, which can also cause volatility on the Forex board. Generally speaking, a high reading is seen as bullish for the US dollar (USD), while a low reading is seen as bearish, although revisions from previous months and the unemployment rate are just as critical as the headline number. The market reaction therefore depends on how the market evaluates all the data in the BLS report as a whole.
