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- Euro recovery stalls ahead of the US NFP release
Euro recovery stalls ahead of the US NFP release
- The EUR/USD pair’s recovery halts with investors growing cautious ahead of the release of the US Nonfarm Payrolls report.
- The uncertain political situation in France, with President Macron into question, is likely to weigh on the Euro.
- In the US, above-expectations Jobless Claims and weak services activity data added pressure to the US Dollar in previous sessions.
The EUR/USD pair trades broadly unchanged on Friday after the rebound from Wednesday’s lows has stalled below the 1.0600 resistance area. The ongoing political turmoil in France is keeping investors on edge while cautiousness ahead of the US Nonfarm Payrolls (NFP) report release is providing some support to the US Dollar (USD).
The Greenback went through some selling on Thursday amid a positive risk sentiment and a higher-than-expected increase in weekly Jobless Claims.
These figures come after a raft of disappointing figures related to the performance of the US services sector and below estimations ADP employment data, adding to the selling pressure on the US Dollar.
Daily digest market movers: Euro hesitates as France’ political uncertainty weighs
- An increasingly questioned French President, Emmanuel Macron, has taken the difficult task of finding a prime minister in the context of a strongly divided parliament and far-right candidate Marine Le Pen breathing on his neck. While markets have become increasingly relaxed about France’s debt risk, the scenario isn’t the best for a significant Euro (EUR) recovery.
- In the US, Nonfarm Payrolls are expected to have increased by 200,000 in November, sharply up from the 12,000 reading in October when hurricanes and strikes impacted heavily on employment.
- The second reading of the Eurozone’s Q3 GDP has confirmed that the economy grew at a 0.4% pace compared with the previous quarter, and by 0.9% yearly, as previously estimated.
- The US Unemployment Rate is expected to have ticked up to 4.2% from the previous 4.1%, which will keep hopes of a Federal Reserve (Fed) 25 basis points (bps) interest-rate cut in December.
- Data released on Thursday showed that US Weekly Jobless Claims increased by 224K, accelerating from the upwardly revised 215K seen a week earlier. This, together with the weaker-than-expected ADP report on Wednesday, has cast some doubts about the strength of Friday’s Payrolls report.
- Fed Chairman Jerome Powell stated earlier this week that the US economy is stronger than what central bank policymakers had expected when they started cutting rates. The Fed chief reiterated the cautious approach to monetary easing and said that interest rate cuts will be gradual.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
USD EUR GBP JPY CAD AUD NZD CHF USD 0.05% -0.05% 0.33% 0.10% 0.48% 0.66% -0.08% EUR -0.05% -0.10% 0.29% 0.05% 0.42% 0.61% -0.14% GBP 0.05% 0.10% 0.35% 0.15% 0.52% 0.70% -0.04% JPY -0.33% -0.29% -0.35% -0.22% 0.15% 0.32% -0.41% CAD -0.10% -0.05% -0.15% 0.22% 0.37% 0.56% -0.19% AUD -0.48% -0.42% -0.52% -0.15% -0.37% 0.18% -0.58% NZD -0.66% -0.61% -0.70% -0.32% -0.56% -0.18% -0.75% CHF 0.08% 0.14% 0.04% 0.41% 0.19% 0.58% 0.75% 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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Technical analysis: EUR/USD faces resistance at 1.0600
The immediate EUR/USD bias is positive, with the pair bouncing up from week lows at 1.0475 lows. Still, the 1.0600 resistance area is likely to be a tough one after bulls have recently been capped when trying to overcome it.
The pair would need a downbeat NFP report to break the mentioned 1.0600 and shift the focus toward the mid-November highs at 1.0650-1.0660.
On the contrary, strong US employment data would give a fresh boost to the US Dollar, pushing the EUR/USD pair towards 1.0470 ahead of 1.0420.
EUR/USD 4-hour Chart
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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