- EUR/USD falls to its lowest level in many weeks and is under pressure from a combination of factors.
- Optimistic NFP data in the US weakens Fed forecasts for interest rate cuts and continues to support the dollar.
- Growing political uncertainty weighs on the euro and contributes to its weakening.
The EUR/USD pair remains under some selling pressure for the second day in a row and fell to its lowest level in over three weeks during Monday’s Asian session. Spot prices are currently hovering around the 1.0775 level and appear vulnerable to an extension of the post-NFP collapse momentum through the 100-day straightforward moving average (SMA).
The Labor Department’s closely watched monthly jobs report showed the U.S. economy added 272,000 jobs in May. jobs compared to the expected 185 thousand. and revised upwards 175 thousand from the previous month. Moreover, average hourly earnings beat consensus estimates and rose 4.1% in the 12 months through May, eclipsing the rise in the unemployment rate to 4.0%.
Nevertheless, the data forced investors to limit expectations of an imminent interest rate cut by the Federal Reserve (Fed) in September and kept U.S. Treasury yields high. This fact, along with the cautious sentiment in equity markets, underpins the safe-haven US dollar (USD) and is proving to be a key factor putting some downward pressure on the EUR/USD pair.
The common currency, however, is weakened by the aggregated exit poll, which showed that Eurosceptic nationalists made the biggest gains in Sunday’s voting in the European Parliament elections. Moreover, French President Emmanuel Macron’s decision to call early elections at the end of the month increases political uncertainty in the euro zone’s second-largest economy and favors eurobears.
This, in turn, suggests that the path of least resistance for EUR/USD is down, although investors may refrain from placing aggressive directional bets ahead of the key FOMC decision on Wednesday. Driven by the risk of key central bank events, investors will face the release of the latest US consumer inflation data, which will drive the USD and provide a significant boost.
