- EUR/USD holds steady at around 1.0900 in the European morning.
- The ECB raised key rates by 25 basis points as expected.
- Nonfarm Payrolls in the US are forecast to rise 185K in May.
EUR/USD registered small gains on Thursday and stabilized at around 1.0900 in the early European session on Friday. May labor market data from the US could ramp up the market volatility heading into the weekend.
The European Central Bank (ECB) announced on Thursday that it raised its key rates by 25 basis points following the June policy meeting, as expected. In the post-meeting press conference, ECB President Christine Lagarde refrained from confirming additional rate cuts and reiterated the data-dependent approach moving forward.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.41% | -0.41% | -1.21% | 0.30% | -0.34% | -0.96% | -1.57% | |
| EUR | 0.41% | 0.03% | -0.78% | 0.71% | -0.05% | -0.55% | -1.18% | |
| GBP | 0.41% | -0.03% | -0.76% | 0.68% | -0.01% | -0.64% | -1.21% | |
| JPY | 1.21% | 0.78% | 0.76% | 1.48% | 0.93% | 0.39% | -0.21% | |
| CAD | -0.30% | -0.71% | -0.68% | -1.48% | -0.66% | -1.25% | -1.87% | |
| AUD | 0.34% | 0.05% | 0.01% | -0.93% | 0.66% | -0.51% | -1.16% | |
| NZD | 0.96% | 0.55% | 0.64% | -0.39% | 1.25% | 0.51% | -0.66% | |
| CHF | 1.57% | 1.18% | 1.21% | 0.21% | 1.87% | 1.16% | 0.66% |
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).
Early Friday, several ECB policymakers adopted a cautious tone on further easing but voiced their optimism about the inflation outlook, making it difficult for the Euro to find direction.
ECB policymakers Kazaks and Muller warrant caution on further rate cuts.
ECB’s Nagel: ECB isn't on autopilot on interest-rate cuts.
ECB's de Guindos: Inflation is to be around 2% next year.
In the second half of the day, the US Bureau of Labor Statistics will release the jobs report for May. Nonfarm Payrolls (NFP) are expected to rise 185,000 following the weaker-than-forecast 175,000 increase recorded in April. Ahead of next week's Federal Reserve policy meeting, the market reaction to labor market data could be straightforward but remain short-lived.
In case NFP surprises to the upside with an increase of more than 200,000, the US Dollar (USD) could hold its ground ahead of the weekend and make it difficult for EUR/USD to stretch higher. On the other hand, a disappointing print, at or below 150,000, could trigger a fresh leg of USD selloff and provide a boost to the pair. If the data arrives near analysts' estimates, revisions to previous reading and the wage inflation figures could drive the USD's valuation. On a yearly basis, Average Hourly Earnings are forecast to rise 3.9%.
EUR/USD Technical Analysis
EUR/USD faces immediate resistance at 1.0900, where the mid-point of the ascending regression channel is located. If the pair rises above this level and starts using it as support, it could target 1.0950 (static level) and 1.0980 (upper limit of the ascending channel) next.
On the downside, 1.0860-1.0850 (50-period Simple Moving Average (SMA) on the 4-hour chart, 100-period SMA, lower limit of the ascending channel) aligns as key support before 1.0800 (200-period SMA, static level).
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
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