Nonfarm Payrolls set to show hiring environment in US labor market remained subdued in June

• Nonfarm Payrolls are forecast to rise by 110K in June, lower than May’s 139K increase.
• The United States Bureau of Labor Statistics will release the employment data on Thursday at 12:30 GMT.
• The US jobs report could significantly impact the US Dollar’s performance as it provides key data to gauge the timing of the next Fed rate cut.

The all-important United States (US) Nonfarm Payrolls (NFP) data for June will be released by the Bureau of Labor Statistics (BLS) on Thursday at 12:30 GMT.

The June employment report will be closely scrutinized to gauge the timing of the US Federal Reserve’s (Fed) next interest rate cut and the direction of the US Dollar (USD), which trades close to three-and-a-half-year lows against its major peers.

What to expect from the next Nonfarm Payrolls report?

Economists expect Nonfarm Payrolls to rise by 110,000 in June after reporting a 139,000 increase in May. The Unemployment Rate (UE) will likely tick higher to 4.3% during the same period, following May’s 4.2%.

Meanwhile, Average Hourly Earnings (AHE), a closely watched measure of wage inflation, are expected to rise by 3.9% year-over-year (YoY) in June, at the same pace as seen in May.

Previewing the June employment report, TD Securities analysts said: “We expect NFP job gains moderated to 125K in June. Homebase data suggest a similar deceleration in gains as in May. We also expect the UE rate to tick up to 4.3% as continuing claims have risen between reference weeks.”

“Last month just rounded down to 4.2%. AHE likely moderated to 0.2% MoM from 0.4% (3.8% YoY). Leading indicators suggest downside risks to employment data in June.,” they added.

How will US June Nonfarm Payrolls affect EUR/USD?

Amidst renewed concerns over US President Donald Trump’s ‘big, beautiful’ spending bill and tariffs, the US Dollar wallows near the lowest level since February 2022 against its major currency rivals.

Markets pondered the prospects of the Fed rate cuts, especially after Chairman Jerome Powell’s cautious remarks at the European Central Bank (ECB) Forum on central banking in Sintra on Tuesday.

Powell noted that “we're taking time, for as long as the US economy is solid, the prudent thing is to wait."

However, the Fed Chair clarified: “I wouldn't take any meeting off the table. Can't say if July is too soon to cut rates, will depend on data."

On the data front, the JOLTS report on Tuesday showed that US Job Openings, a measure of labor demand, were up 374,000 to 7.769 million by the last day of May, way above expectations of 7.3 million in the reported period. The US ISM Manufacturing PMI improved to 49 in June versus May’s 48.5 and the forecast of 48.8.

In contrast, the Automatic Data Processing (ADP) report showed on Wednesday that the US private sector payrolls dropped by 33,000 jobs last month, the first decline since March 2023, after a downwardly revised increase of 29,000 in May. The market forecast was for an increase of 95,000.

Traders are now pricing in 64 basis points (bps) of cuts this year from the Fed, with the odds of a move in July at 25%, according to Refinitiv’s interest rate probabilities.

Therefore, stakes are high heading into the June jobs data, as the Fed sticks to its ‘data-dependent’ rhetoric.

A reading below the 100,000 level and an expected increase in the Unemployment Rate could indicate loosening labor market conditions, ramping up the odds of a Fed rate cut this month.

This scenario will likely exacerbate the USD’s pain and bolster the Gold price recovery from monthly troughs.

In case the NFP prints above 150,000 and the Unemployment Rate holds steady at 4.2%, Gold could continue its pullback from weekly highs as the data could push back against expectations of more than two Fed rate cuts this year.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“The main currency pair risks a pullback toward the 21-day Simple Moving Average (SMA) support at 1.1568 as the 14-day Relative Strength Index (RSI) hovers in the overbought territory above the 70 level on the daily chart.”

“Buyers must take out the September 2021 high of 1.1909 to extend the uptrend toward the 1.2000 psychological level. Conversely, EUR/USD could challenge the 21-day SMA at 1.1568 if a correction kicks off. The next downside targets are aligned at the 1.1500 round level and the 50-day SMA at 1.1414.”