EUR/USD picks up amid a brighter sentiment ahead of the US NFP release
- The Euro appreciates within range but is on track for a moderate weekly loss.
- The US Dollar pulls back with the market bracing for a soft US NFP report later in the day.
- Weak US employment figures on Thursday and dovish comments from Fed speakers are weighing on the US Dollar.
The EUR/USD pair is trading moderately higher on Friday, currently at 1.1677, but still on track for its second consecutive negative week. Market hopes of a Federal Reserve (Fed) interest rate cut keep a mild risk appetite alive, yet with the US Dollar's (USD) sales limited ahead of the US Nonfarm Payrolls report.
Investors are hoping for a relatively soft NFP report later in the day to cement market expectations of a Fed rate cut in September. US weekly Initial Jobless Claims data and the ADP report both pointed to a weaker labor market on Thursday, endorsing those views.
Comments from Federal Reserve officials have leaned to the dovish side this week. New York Fed President John Williams affirmed on Thursday that he sees "gradual rate cuts," and Chicago Fed President Austan Goolsbee reiterated that September's meeting will be "live" after warning about the deterioration of the labour market.
Bets about lower interest rates in the US have helped to ease the bond market crisis seen earlier in the week. In Europe, the German and French 30-year yields have retreated from Wednesday's lows, although they remain at relatively high levels.
In the Eurozone economic calendar, the focus this Thursday is on the employment change and the final reading of the Q2 Gross Domestic Product (GDP). Investors, however, will be more attentive to the US Nonfarm Payrolls report for confirmation of a Fed rate cut in September.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.22% | -0.24% | -0.12% | -0.11% | -0.38% | -0.36% | -0.21% | |
| EUR | 0.22% | -0.00% | 0.00% | 0.11% | -0.07% | -0.12% | 0.01% | |
| GBP | 0.24% | 0.00% | 0.06% | 0.11% | -0.05% | -0.13% | 0.06% | |
| JPY | 0.12% | 0.00% | -0.06% | 0.09% | -0.17% | -0.20% | 0.09% | |
| CAD | 0.11% | -0.11% | -0.11% | -0.09% | -0.21% | -0.25% | -0.07% | |
| AUD | 0.38% | 0.07% | 0.05% | 0.17% | 0.21% | -0.08% | 0.12% | |
| NZD | 0.36% | 0.12% | 0.13% | 0.20% | 0.25% | 0.08% | 0.18% | |
| CHF | 0.21% | -0.01% | -0.06% | -0.09% | 0.07% | -0.12% | -0.18% |
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: A mild risk appetite is buoying the Euro
- The Euro is drawing support from a moderate risk-on market on Thursday to regain some of the ground lost earlier in the week, although upside attempts are likely to remain contained, with investors wary of selling US Dollars ahead of the NFP report.
- Weak payrolls data boosted market expectations of a September rate cut last month, and the market consensus points to a similar performance in August. Private payrolls are seen growing by 75K following a 73K increase in July.
- US employment data released on Thursday confirmed the weak momentum of the labor market. The ADP Employment Change report showed a 54K increase in August, well below the 65K forecasted, and about half of the previous month's 106K reading.
- US weekly Initial Jobless Claims rose to 237K in the last week of August, their highest level since June, exceeding market expectations of a 230K increase from the previous week's 229K.
- Futures markets are practically fully pricing a 25-basis-point Fed rate cut after the September 16 and 17 meeting. The CME Group's FedWatch tool is showing a 99.4% chance of a quarter-point cut, and at least another one before the end of the year.
- In Europe, the final reading of the second quarter's GDP is expected to confirm that the economy decelerated at a 0.1% pace in the quarter, down from a 0.6% growth in Q1, and 1.4% year-on-year, from 1.5% in the first three months of the year.
Technical Analysis: EUR/USD faces resistance at 1.1680 and 1.1720
The EUR/USD technical picture shows a building positive trend, although bullish momentum remains frail. The 4-hour Relative Strength Index keeps wavering back and forth around the 50 level, and the MACD indicator is showing a lack of clear momentum.
On the upside, bulls are likely to be challenged at the September 3 high of 1.1682. Beyond here, the descending trendline resistance, now around 1.1720 and the 1.1735 area, which capped rallies on August 13 and 22, and September 1, is likely to pose a significant resistance.
Immediate support is at Thursday's low near 1.1630 ahead of the September 3 low, right above 1.1610. Further down, the area between 1.1575 and 1.1590, which held bears on August 11, 22, and 27, and is also the floor of the last four weeks' trading range.
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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