EUR/USD Turns Cautious after Friday’s NFPs Boost
EUR/USD Analysis
Friday's data showed further signs of cooling in the US labor market, as the 187,000 jobs created in July, marked another downside surprise and the second smallest addition since the December 2020 negative print. This reading along with easing inflation, supports chances of a Fed pause in September. Markets believe that the terminal rate has already been reached and look for cuts as early as Q1 of the next year, according to CME's FedWatch Tool [1].
EUR/USD rose after the report, which keeps 1.1276 in play, but does not inspire confidence at this stage for challenging it.
On the other hand, unemployment dropped for third straight month, returning closer to the five-decades low, while wages remain elevated. At the same time, the economy continues to perform better than expected, creating pressure for more monetary restrain. The Fed's projections imply another 25 basis points hikes [2], while Ms Bowman (voter) struck a clear hawkish tone after the NFPs, speaking of the need for "additional rate increases". [3]
ECB President Lagarde meanwhile, had recently opened the door to a September pause [4], in dovish shift that essentially negates the policy differential that had boosted the common currency in the past. EUR/USD faces renewed pressure today and remains exposed to the 200Days EMA (at around 1.0790), although a breach of 1.0634 would need a strong catalyst.
Global monetary policy has entered a highly uncertain phase, where every piece of data matters. As such, Thursday's CPI inflation update will be significant and could determine the next leg of the pair. Both Fed Chair Powell and ECB President Lagarde touted their data dependency and refrained for offering any forward guidance in regards to their next steps.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 07 Aug 2023 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html | |
| Retrieved 07 Aug 2023 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230614.pdf | |
| Retrieved 07 Aug 2023 https://www.federalreserve.gov/newsevents/speech/bowman20230805a.htm | |
| Retrieved 12 Apr 2026 https://www.ecb.europa.eu/press/pressconf/2023/html/ecb.is230727~e0a11feb2e.en.html |
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