The EUR/USD exchange rate showed increased volatility on Friday as a result of NFP and ISM data, but by the end of the day it was around the level prior to the data’s publication. Wall Street indexes ended the day with tiny gains, with Nasdaq Composite as the biggest gainer, growing by 0.2 percent. Despite the employment change in the non-agricultural sector exceeding 200,000 and the unemployment rate staying constant at 3.7 percent, the dollar failed to strengthen.
At first glance, the NFP report on Friday seemed robust. However, closer examination reveals certain “cracks” and signs of deterioration. The number of jobs created in November had been adjusted downward and the weekly total worked hours declined. The labor participation rate also fell from 62.8 percent to 62.5 percent. However, the data on average hourly wages supported the dollar; there was a growth of 4.1 percent year-on-year and 0.4 percent month-on-month.
According to the Friday report, although the labor sector remains relatively strong, the market is evidently not anticipating any significant adjustments concerning the Federal Reserve’s interest rate cuts. Additionally, the dollar’s problem of reinforcement could have also been the result of the disappointing ISM report. Even though the main index stayed above the threshold level of 50 points, it fell short of expectations at 50.6 points. Both the employment sub-index and the new orders index fell, while the index regarding paid prices turned out to be slightly better than expected but worse than November.
Investors are now focusing on Thursday, when December inflation data for the US will be announced. Both the Core and Headline indexes are expected to increase by 0.2 percent month-on-month. Such performance may slow down inflation reaching the Federal Reserve’s 2 percent target. Annual estimates suggest that the CPI will climb to 3.2 percent, while the core is expected to reduce its dynamics from 4 percent in November to 3.8 percent in December. The latest FOMC meeting minutes highlighted uncertainties about monetary policy. The market continues to contemplate whether Powell’s recent remarks were interpreted as too dovish.
On Friday, the EUR/USD pair hit lows just below 1.09, thus nearing the lower band of the uptrend channel. Additionally, the bottom fell on the 38.2 percent internal Fibo retracement level. At this point, the pair appears to have encountered a technical barrier, which may not be easily breached. There is no relevant data from the US today, and releases from the eurozone should not significantly affect the euro’s evaluation.
