Euro US Dollar (EUR/USD) Exchange Rate Rangebound as Investors Anticipate US Jobs Data

Euro US Dollar (EUR/USD) Exchange Rate Jumps as US NFP Data Shows Sharp Cooldown

(Article updated 14:45, 10/3/2023) The Euro US Dollar (EUR/USD) exchange rate is rallying this afternoon, following the publication of the latest US non farm payrolls data.

The data beat forecasts and showed that 311,000 jobs were created in February, but did little to inspire USD investors. As January showed such a substantial leap, the cooldown appears to have inspired a sell-off of the ‘Greenback’.

Because of this, USD is plummeting against most major peers. Due to the cooldown, the Federal Reserve may be less likely to increase the pace of rate hikes.

Nathaniel Casey, Investment Manager at Evelyn Partners, explains:

‘With the Jobs data now softening again and the unemployment rate ticking up, the market can feel slightly relieved that the likelihood of the Fed increasing the pace of hikes has fallen for the time being.’

At the time of writing, EUR/USD is trading around US$1.0669, a rise of roughly 0.8% from the morning’s opening rates.

Euro US Dollar (EUR/USD) Exchange Rate Narrows ahead of US NFP Data

The Euro US Dollar (EUR/USD) exchange rate is trading in narrow bounds this morning, as markets anticipate key US jobs data.

At the time of writing, EUR/USD is trading around US$1.0586, showing little movement from the morning’s opening rates.

US Dollar (USD) Wavers ahead of Key NFP Data

The US Dollar (USD) is wavering this morning, as investors anticipate this afternoon’s non farm payrolls data release.

While a sharp cooldown from January’s figures is expected, economists are forecasting that 205,000 jobs were created in February.

If it prints accurately, it may underline the perception that the US’ labour market remains strong. As such, it could boost Federal Reserve rate hike bets, and potentially bring strength to the ‘Greenback’.

However, the data could point to underlying weakness in the US’ labour market. James Knightley, Chief International Economist at ING, explains:

‘Instead, when combined with the lay-off announcements it points to a jobs market that will increasingly lose higher paid, full-time positions only to replace them with lower paid less secure, part time work predominantly in the leisure and hospitality sector.’

Elsewhere, the current souring market mood may be adding extra cushioning for the ‘Greenback’. With stocks near universally in the red at the time of writing, bearish trade appears to be colouring the markets, bringing safe-haven flows.

Euro (EUR) Muted amid Thin Data Calendar

The Euro (EUR) is trading quietly this morning, as a lack of impactful economic data keeps the single currency muted.

Underpinning the Euro could be elevated rate hike bets, following this morning’s final German inflation data. As the data showed no deviation from preliminary readings, it could point to how high inflation remains in the bloc.

Throughout the week, European Central Bank (ECB) policymakers have remained doggedly hawkish, and continually underlined the need for further hikes.

Because of this, markets are expecting further hikes beyond the March decision. However, this carries a double-edged sword. While the US economy could handle aggressive tightening from the Federal Reserve, the EU economy is more fragile.

As such, while the bets are in place, anxieties over the bloc’s economic outlook could be adding an undercurrent.

Euro US Dollar (EUR/USD) Exchange Rate Forecast: US CPI in Focus

Looking ahead to early next week for the US Dollar, the core catalyst of movement may be February’s CPI data.

Due to print on Tuesday, the data is expected to show core inflation to hold at 5.6%, while headline inflation may fall to 6.2%.

If this prints as forecast, the sticky core inflation reading could provide further impetus for the Federal Reserve to continue hiking rates. As such, the US Dollar could rally on elevated rate hike bets.

For the Euro, data releases are thin on the ground early next week. Because of this, market sentiment could be the key driver.

With the Ukraine-Russia war continuing, Ukraine’s defence of Bakhmut appears to be holding. If the tide turns, sentiment towards the single currency could sour.

John Mulcahey

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