Key Points:
- EUR/USD pair dropped to 1.0775, influenced by recent economic data and market sentiment.
- May report shows 272,000 jobs added, surpassing expectations and indicating a resilient labor market.
- Strong US employment data reduces expectations for a Fed rate cut, boosting Treasury yields and USD.
The EUR/USD pair has been experiencing significant selling pressure for the second consecutive day, dipping to levels not seen in over three weeks. Currently trading around 1.0775, the pair remains vulnerable to extending its post-NFP (Non-Farm Payroll) breakdown momentum through the critical 100-day Simple Moving Average (SMA). This decline reflects broader market sentiments and the impact of recent economic data.
Robust US Job Growth in May with 272,000 New Jobs
The US employment report for May revealed that the economy added 272,000 jobs, significantly surpassing the anticipated 185,000 jobs and the previous month’s revised figure of 175,000. This robust job growth highlights the ongoing resilience of the US labour market. Additionally, average hourly earnings increased by 4.1% over the 12 months through May, indicating solid wage growth. However, the jobless rate increased to 4.0%, suggesting some underlying slack in the labour market despite strong hiring figures.
Market Adjusts to Strong Jobs Data, EUR/USD Under Pressure
Following the stronger-than-expected employment data, market participants have scaled back expectations for a Federal Reserve rate cut in September. This shift has elevated US Treasury bond yields, reflecting investor adjustments to a potentially less accommodative monetary policy stance.
Furthermore, equity markets have adopted a cautious mood in response to these developments, with the USD finding support from safe-haven demand. Consequently, the EUR/USD pair has come under additional pressure due to the robust US data and the overall market sentiment.
Eurosceptic Gains in EU Parliament Raise Uncertainty
Political uncertainty in Europe is further exacerbating the challenges for the Euro. Exit polls from the recent European Parliament elections indicate significant gains for eurosceptic nationalists, raising concerns about the future direction of the European Union. President Emmanuel Macron faces snap elections later this month in France, adding to the political instability in the Eurozone’s second-largest economy. This increased uncertainty favours Euro bears as investors weigh the potential implications for the region’s economic and political landscape.
EUR/USD Nears Downside Ahead of FOMC Decision
Given the prevailing market conditions, the path of least resistance for EUR/USD is to the downside. Traders will likely avoid aggressive bets before key events, including Wednesday’s FOMC policy decision and the latest US inflation figures. These events are expected to drive the USD and provide meaningful impetus to the EUR/USD pair, influencing its direction in the near term.
