- EUR/USD fell to 1.0840 on increased risk appetite in the broad market following the release of the US NFP.
- Sharp revisions to NFP data have rekindled hopes that the Federal Reserve will cut interest rates in September.
- Next week: Federal Reserve Chairman Powell, U.S. CPI printout, German retail sales.
The EUR/USD pair surged following the release of mixed US non-farm payrolls (NFP) data on Friday before settling higher, peaking near 1.3840 just before the close of the trading week.
European industrial production fell more than expected on Friday, contracting by -2.5% m/m in May and curbing risk appetite in the fibre sector. EU-wide retail sales beat forecasts, printing 0.3% y/y compared with an expected 0.1%, but still down from a previous 0.6%.
Read more: US nonfarm payrolls rose 206,000 in June, compared with a forecast of 190,000
Investors have ignored a better-than-expected Non-Farm Payrolls (NFP) report and are instead turning their attention to rising unemployment, slowing wage growth and downward revisions to previous employment reports. As a result, they are increasing their bets that the Federal Reserve will be forced to cut interest rates sooner rather than later. CME’s FedWatch Tool shows that interest rate markets are now pricing in a nearly 80% probability of a rate cut of at least a quarter percentage point on Sept. 18. Friday’s U.S. Non-Farm Payrolls (NFP) data topped the median market forecast, adding 206,000 net jobs in June. That figure was higher than the 190,000 expected, but the previous month’s figure was sharply revised down to 218,000 from an initial 272,000.
Growth in average hourly earnings in the U.S. slowed to an expected 3.9% year-over-year in the year ending in June, from 4.1% in the previous period. In addition, the U.S. unemployment rate rose to 4.1%, marking its first enhance since December 2021. That was slightly above the market’s expected hold of 4.0%.
Fed’s semiannual policy report: Need more confidence before deciding to cut interest rates
Fiber traders will be looking ahead to Federal Reserve (Fed) Chairman Jerome Powell’s speech on Tuesday, followed by final inflation data from the EU and the US on Thursday. Next Friday will close out the week with German retail sales, as well as US Producer Price Index (PPI) inflation and the University of Michigan Consumer Sentiment Index.
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 significant as the headline number. The market reaction therefore depends on how the market evaluates all the data in the BLS report as a whole.
Technical outlook for EUR/USD
The EUR/USD pair drifted toward the upper range in largely one-sided trading this week, rising from early week lows around 1.0710. The pair is up 1.25% from bottom to top during the trading week and has recorded seven consecutive trading days in the red.
Fiber traders continued price action north of the 200-day exponential moving average (EMA) at 1.0784, but a tough descending channel continues to price in bearish technical pressure just above 1.0860.
