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Euro US dollar (EUR/USD) fluctuates ahead of US jobs data

Euro US dollar (EUR/USD) volatile ahead of US Jobs Report

The euro US dollar (EUR/USD) exchange rate is moving without a clear trajectory this morning ahead of the latest US jobs data, due for release this afternoon.

At the time of writing the EUR/USD exchange rate is trading at $1.0793, virtually unchanged from this morning’s opening rate.         

Euro (EUR) wavers despite lacklustre industrial activity

The euro (EUR) is fluctuating today despite a surprise contraction in Eurozone industrial production in April.

Industrial activity fell by 0.2% in April, missing market projections of a 0.2% increase and notably slowing from the previous month’s downwardly revised 0.5% rise.

However, the downbeat release appeared to fall mostly by the wayside, with economists noting the anomalous nature of April’s release after a particularly robust reading in March and volatility stemming from shifting European Central Bank’s (ECB) monetary policy expectations.

Leo Barincou, Senior Economist at Oxford Economics, said:

‘Despite today’s lacklustre print, we still think Europe’s industrial sector hit a trough in the first quarter and will register sustained growth soon. In the near term, industry will benefit from a turning inventory cycle as companies rebuild their inventories. Gradual monetary loosening will also be a major tailwind.’

US dollar (USD) recoups losses ahead of jobs data

The US dollar (USD) is rebounding from yesterday’s losses amid a lack of fresh US releases so far this morning.

Following a batch of cooler-than-forecast US inflation data, the Federal Reserve kept interest rates at a two-decade high in its latest monetary policy update last night, reiterating that it would need to see further progress on disinflation as well as wider signs of an easing US economy before enacting any monetary unwinding.

Speaking at the central bank’s accompanying press conference last night, Fed Chair Jerome Powell said:

‘We’ve got a good strong labour market. We think we’ve been making progress toward the price stability goal. We’re asking … is our policy stance about right? And we think yes, it’s about right. We don’t make decisions about future meetings until we get there. Really, it’s going to be not just the inflation readings. It’s going to be the totality of the data, what’s happening in the labour market, what’s happening with the balance of risks, what’s happening with the forecasts, what’s happening with growth. You’re looking at all of that.’

While the senior rate-setter continued to push back against monetary unwinding, markets continued to price in just one interest rate cut throughout 2024, with such assertions underscored by a recent influx of robust American employment data and a sluggish decline in price pressures.

Euro US dollar exchange rate forecast: US jobs data in focus

Looking ahead, the latest initial jobless claims will likely be the core catalyst of USD movement later today. The number of US citizens claiming unemployment benefits is forecast to have edged lower to 225,000 for the week ending 8 June. Should the data print as forecast, signalling that US unemployment remains steady, the ‘greenback’ may strengthen.

Looking to the Eurozone, a series of speeches from ECB policymakers could drive the common currency. Any suggestion that the central bank may continue to enact looser monetary policy in the months to come could leave EUR on the defensive as the week draws to a close.