EUR/USD steadies in cautious markets ahead of US Nonfarm Payrolls
- The Euro remains steady near highs with investors looking from the sidelines ahead of the NFP report.
- Downbeat ADP employment data heightened hopes of a Fed rate cut and curbed the US Dollar's recovery on Wednesday.
- A trade deal between the US and Vietnam boosted optimism and added some weight to the safe-haven USD.
The EUR/USD pair is practically flat on Thursday, trading right below 1.1800 at the time of writing, not far from the multi-year highs reached earlier this week. Investors' appetite for risk is fading as optimism about the US deal with Vietnam gives way to caution heading into the US Nonfarm Payrolls (NFP) data release.
On Wednesday, US President Donald Trump announced a trade deal with Vietnam, which boosted hopes that more such deals could be reached ahead of the July 9 deadline. The US Dollar (USD) lost ground against its main peers before picking up again, as other Asian countries complain about the complex tariff negotiations with the US.
Beyond that, Trump continued with his attacks on the Chairman of the Federal Reserve (Fed), Jerome Powell. The US president asked Powell to "resign immediately" in the latest episode of an unprecedented hammering of a Fed chief that puts into question the independence of the central bank and erodes the US Dollar's status as a reserve currency.
In the Eurozone, Unemployment data released on Wednesday showed an unexpected deterioration of the labour market, and European Central Bank (ECB) policymakers underscored the risks of persistent low inflation stemming from a strong Euro (EUR) and lower energy prices.
The highlight this Thursday is the US Nonfarm Payrolls figures, which have been moved one day forward this month due to the Independence Day holiday in the US on Friday. Payrolls' data will attract particular interest, following an unexpected decline in the ADP Employment report on Wednesday. The risk is skewed to the downside for the US Dollar as a downbeat reading might practically confirm a Fed interest rate cut in the coming months.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.00% | -0.07% | 0.09% | 0.01% | 0.17% | 0.31% | 0.04% | |
| EUR | 0.00% | -0.07% | 0.10% | 0.01% | 0.17% | 0.28% | 0.08% | |
| GBP | 0.07% | 0.07% | 0.16% | 0.10% | 0.23% | 0.34% | -0.06% | |
| JPY | -0.09% | -0.10% | -0.16% | -0.07% | 0.09% | 0.15% | -0.16% | |
| CAD | -0.01% | -0.01% | -0.10% | 0.07% | 0.14% | 0.25% | 0.05% | |
| AUD | -0.17% | -0.17% | -0.23% | -0.09% | -0.14% | -0.06% | -0.28% | |
| NZD | -0.31% | -0.28% | -0.34% | -0.15% | -0.25% | 0.06% | -0.40% | |
| CHF | -0.04% | -0.08% | 0.06% | 0.16% | -0.05% | 0.28% | 0.40% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick 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).
Daily digest market movers: Higher hopes of Fed rate cuts keep US Dollar rallies limited
- The ADP Employment report showed a 33K decline in private payrolls in June, against market expectations of a 95K increase. June's reading features the first contraction since the pandemic and has boosted investors' interest in the NFP report, due at 12:30 GMT, which will be read from a monetary policy perspective.
- Wednesday's ADP reading increased bets for Fed rate cuts in the next two months. Futures markets are now pricing in a 25% chance of a July cut, up from 20% before the report, while the odds for at least a 25 basis points (bps) cut in September have risen to 96% from 90%, according to the CME Group's Fed Watch Tool data.
- The market consensus anticipates a 110K increase on Nonfarm Payrolls in June, following a 139K increase in May. The Unemployment rate is expected to have risen to 4.3% from 4.2%, with Average Hourly Earnings growing at a 3.9% yearly rate, unchanged from the previous month.
- Later on, the US ISM Services PMI is expected to show that the sector's activity returned to growth levels in June, with a 50.5 reading from a slight contraction at 49.9 in May.
- The Eurozone HCOB Services PMI is set to be released at 8:00 GMT and is likely to show that business activity in the sector stagnated in June, with the index at the 50.0 level that divides expansion from contraction, following May's 49.7 reading.
EUR/USD consolidates gains near 1.1830 highs
EUR/USD is going through some consolidation, having rallied more than 2% in a 10-day rally, reaching its highest levels in nearly four years at 1.1830. The pair has failed to find significant acceptance above 11800, but so far, it remains steady near highs with the US Dollar on the defensive.
The 4-hour chart shows the bullish trend intact, with the 14-period Relative Strength Index (RSI) well above the 50 level. Immediate support is at Wednesday's low, at 1.1745. Further down, the area between the June 27 low at 1.1680 and the June 26 low at 1.1650 offers significant support for a bearish correction.
On the upside, immediate resistance is at Wednesday's high of 1.1810 ahead of the June 1 high at 1.1830. Above here, the 127.2% Fibonacci extension level of the July 1-2 reversal is at 1.1850.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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