Euro: Weak US jobs lift EUR against US Dollar on Fed repricing – Danske Bank
Danske Research Team notes that the US Dollar (USD) weakened after a softer US jobs report, allowing EUR/USD to briefly reach its highest level in almost two months.
The US Dollar (USD) experienced a decline following a weaker-than-expected US jobs report, resulting in a temporary increase in the EUR/USD exchange rate to its highest level in nearly two months. The report from Danske Research Team revealed that markets had adjusted their expectations for Federal Reserve (Fed) tightening, particularly for September.
The July jobs report showed nonfarm payrolls at a disappointing -23k, with cumulative revisions for May-June indicating a further decrease of -103k. Despite this, the unemployment rate fell to 4.1% (down from 4.2%) and the labor market participation rate dropped to 61.4%, the weakest level since February 2021. While some traders perceived the report as dovish, others noted the Fed's challenge in balancing weak job growth with a declining unemployment rate.
Consequently, the market now anticipates only an 11 basis point (bp) interest rate hike from the Federal Reserve at the upcoming meeting in September. The USD suffered losses against other G10 currencies, with EUR/USD reaching 1.1581, the highest level in almost two months. In the euro area, the Sentix Investor Confidence index showed a sharp increase in July, marking the third consecutive monthly improvement. The week concluded with the release of Euro area Q2 GDP figures.
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