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Euro Continues to Climb in US Dollar Exchange Rate as US Non-Farm Payroll Report Stings

Friday’s US Jobs Report Keeps Pressure on US Outlook as Euro to US Dollar Exchange Rate Climbs

The Euro to US Dollar (EUR/USD) exchange rate continued its gradual recovery rally when markets opened on Monday, as the latest US data and trade news developments kept pressure on the US Dollar (USD).

Due to trade jitters weighing more and more on the US Dollar, as well as the latest disappointing US jobs data, EUR/USD was more easily able to climb from 1.1690 to 1.1754.

Since markets opened this week, EUR/USD has edged even higher and touched on a high of 1.1777. This was the pair’s highest level in almost a month, since mid-June.

The primary reason for the US Dollar’s weakness since last Friday has been the disappointing wage growth figures in the latest US Non-Farm Payroll results.

On the other hand, the Euro’s (EUR) strength appeared to mostly come from a combination of US Dollar weakness, as well as solid Eurozone confidence stats and German trade data.

Euro (EUR) Exchange Rates Benefit from Weakness in Rivals and Signs of Economic Resilience

While much of the Euro’s strength since last week has been largely due to US Dollar weakness, the currency has found stronger support in domestic news too.

Monday saw the publication of Germany’s May trade balance results, which were generally solid despite market concerns about how US trade tariff jitters may have impacted business activity in the Eurozone’s biggest economy.

The key German trade balance surplus narrowed slightly, from €20.1b to €19.7b – but the seasonally adjusted figure unexpectedly improved from €19.0b to €20.3b.

On top of this, research group Sentix’s Eurozone investor confidence report unexpectedly improved in July. The figure was expected to slide from 9.3 to 8.2, but instead jumped to 12.1.

Both the German trade data and Sentix report indicated that trade jitters had not yet had a notable negative impact on the Eurozone’s economic activity.

Still, analysts from Sentix argued that this figure did not indicate an upswing of confidence, or any underlying trend that would continue.

US Dollar (USD) Exchange Rates Remain Pressured by Signs of Weaker Wages

Warnings from economists that US trade tariff plans could have a negative impact on US economic activity, as well as mixed US data, have put an end to the bullish US Dollar streak seen in recent months.

Most of last week’s US Non-Farm Payrolls report was generally optimistic, with more new jobs being made in June than expected.

However, markets were spooked by the latest weekly earnings figures, which fell short of forecasts in both major prints.

The monthly wages print was expected to remain at 0.3%, but unexpectedly slowed to 0.2%. The yearly figure, on the other hand, remained at 2.7% rather than climbing to the forecast 2.8%.

In response to the report, bets of a fourth 2018 interest rate hike from the Federal Reserve slipped. According to Marvin Loh, senior global market strategist at BNY Mellon:

‘Without an acceleration of wage growth, a fourth hike at the end of the year is a more difficult call and futures shows that hesitation, placing just 50 per cent odds on that event,’

Euro to US Dollar (EUR/USD) Forecast: US Inflation in Focus

There will be many influential Eurozone and US ecostats published throughout the week, but following last week’s disappointing US wage growth results investors will be most highly anticipating the inflation data due on Thursday.

Germany’s final June Consumer Price Index (CPI) results will be published during Thursday’s European session, followed by US inflation results from June during the American session.

These figures are the week’s most influential, at least in terms of Central Bank speculation which will remain a focus for US Dollar movement.

If the US inflation figures fall short of expectations, it will make investors concerned that other US price pressures are more subdued than expected. This could weigh even further on Federal Reserve interest rate hike bets and weaken the US Dollar.

Of course, other key data due throughout the week could prove influential too.

ZEW’s Eurozone economic sentiment data on Tuesday and US Michigan Consumer Sentiment data on Friday could inspire shifts in the Euro to US Dollar (EUR/USD) exchange rate.