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Euro US dollar (EUR/USD) subdued as markets eye US labour data

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Euro US Dollar (EUR/USD) wavers ahead of US non farm payrolls

The euro US dollar (EUR/USD) exchange rate is trading without a clear direction this morning ahead of market moving US employment data, due this afternoon.

At the time of writing the EUR/USD exchange rate is trading at $1.0837, virtually unchanged from this morning’s opening rate.

Euro (EUR) subdued as retail data disappoints

The euro (EUR) is trapped in a narrow range today following worse-than-expected retail data and tepid European Central Bank (ECB) commentary.

Retail sales in the Eurozone fell by 0.5% in February, following January’s 0.1% increase, and missing forecasts of a 0.4% slump.

Further stymieing any significant movement in the euro today are the latest minutes from the European Central Bank’s meeting last month. While the published minutes showed little deviation from the central bank’s previous narrative, further discussion of a June interest rate cut served to deter investor interest in the common currency.

An excerpt from the ECB’s notes stated:

‘Members expressed increased confidence that inflation was on track to decline sustainably to the 2% inflation target in a timely manner. While it was wise to await incoming data and evidence, the case for considering rate cuts was strengthening.’

US dollar (USD) edges higher ahead of high impact releases

The US dollar (USD) is ticking up this morning as investors anticipate the weighty US non farm payrolls, due for release this afternoon.

The data is set to report a slowing of job creation in March, which will likely drive significant volatility for the ‘greenback’. While the US labour market has faced surmounting scrutiny in recent months, further signs of slacking American employment could serve to dampen investor interest in the US dollar.

Francesco Pesole, FX Strategist at ING, commented:

‘Yesterday, the NFIB reported only 11% of small businesses are looking to create jobs in the next three months, the lowest percentage since May 2020. Small businesses account for roughly half of total US jobs and the hiring indicator has proven to have better predictive power official payrolls.’

Further indication of a cooling labour market could encourage the Federal Reserve to ramp up its loosening cycle in the coming months in order to jumpstart employment growth, which may leave USD to face headwinds as the session progresses.

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

Looking ahead, the hotly anticipated US non farm payrolls could spark notable volatility for the euro US dollar exchange rate as the week draws to a close. Should the data print as expected, cooling within the US labour sector could undermine USD exchange rates.

In turn, this could lend EUR some support, with a weakening ‘greenback’ lifting the common currency, due to the euro’s negative correlation with USD.

A series of speeches from Federal Reserve policymakers this afternoon could also serve to drive USD movement. Rate-setters Thomas Barkin, Michelle Bowman and Susan Collins are all due to speak later today. Any dovish commentary could further undermine the US dollar as the week draws to a close.