Euro US Dollar (EUR/USD) Exchange Rate Climbs on US Labour Market Fears

EUR/USD Firms as US Initial Jobless Claims Unexpectedly Rise

(Updated 16:30, 9/3/23)

The Euro US Dollar (EUR/USD) exchange rate is strengthening this afternoon as investors have moved to the sidelines ahead of the key labour market data tomorrow. In the meantime, initial jobless claims ticked higher than expected, potentially highlighting a cooling jobs market. However, all eyes will be on tomorrow’s unemployment rate and non-farm payrolls for more concrete evidence.

At time of writing, the EUR/USD exchange rate is around $1.0578, a 0.27% climb from the morning’s opening levels.

Original article continues below…

Euro US Dollar (EUR/USD) Exchange Rate Fluctuates as Investors Await US Jobs Data

The Euro US Dollar exchange rate is trading narrowly this morning as the market braces for key US labour market data. A data-dependant stance from the Federal Reserve looks to have tempered rate hike bets.

At time of writing, the EUR/USD exchange rate is around $1.0559, relatively unchanged from this morning’s opening levels.

US Dollar (USD) Quiet Ahead of Key Jobs Data

The US Dollar is losing steam today after its rally in the wake of a hawkish Federal Reserve.

On his second day of testifying before Congress, Fed Chair Jerome Powell poured cold water on aggressive rate hike expectations. Despite reaffirming his message that the central bank is prepared to increase the rate of hikes, Powell admits the Fed is still ‘up in the air’ on the decision. He said:

‘If – and I stress that no decision has been made on this – but if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.’

On that, USD investors have shifted to the sidelines in anticipation for labour market data later today and Friday. With initial jobless claims released later today, tomorrow will see both non-farm payrolls and the unemployment rate revealed. A persistently tight labour market could allow the Fed more breathing room in raising rates.

Euro (EUR) Subdued amid a Mixed Market Mood

Meanwhile, the Euro (EUR) is also struggling to find much demand amid a lack of economic data. The negative correlation the Euro shares with the US Dollar has seen the single currency waver on the latter’s strength.

As EUR investors gear up for next week’s policy meeting from the European Central Bank (ECB), ECB policymaker Francois Villeroy de Galhau reiterated the need to bring inflation down. With the market expecting another bold 50bps rate hike next week, Villeroy added that inflation across the Eurozone remains too high. He added:

‘I can’t comment on interest rates, but what is very important is the inflation expectations. The peak will come this semester, and then inflation will halve by the end of the year.’

Despite a lack of data, and the US Dollar holding strong, the Euro could remain supported through elevated rate hike expectations.

Euro US Dollar Exchange Rate Forecast: US Jobs Data to Bolster the Greenback?

Looking ahead, the Euro US Dollar exchange rate could see further movement with the first of a flurry of crucial US labour market data. Initial jobless claims are expected to climb modestly, and non-farm payrolls are predicted to slip. However, with the unemployment rate set to remain at the lowest level since May 1969, the overall labour market looks to remain tight. This in turn could boost the ‘Greenback’ on elevated rate hike expectations.

Meanwhile, several speeches from ECB policymakers could influence the Euro. Headlined by ECB President Christine Lagarde, any further clues to how the central bank intends to tackle inflation beyond next week’s meeting could inspire investors.

Danny Tingle

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