EUR/USD Surges Unexpectedly—Is the Fed’s Next Move About to Shake Your Portfolio to Its Core?
Daily digest market movers: The Euro jumps on broad US Dollar weakness
- US Nonfarm Payrolls increased by just 73K in July, a sharp slowdown from June’s 147K and well below the 110K expected. The Unemployment Rate edged up to 4.2% from 4.1%, in line with forecasts. Meanwhile, Average Hourly Earnings rose 3.9% YoY, up from 3.7% in June and slightly above the expected 3.8%, indicating lingering wage pressure despite weaker hiring.
- Following the latest round of economic data, the Fed’s parade began. Cleveland Fed President Beth Hammack described the July Nonfarm Payrolls report as “disappointing,” but noted that the labor market remains broadly balanced. She added that she remains “confident in the decision made earlier this week” to hold rates steady.
- Meanwhile, Atlanta Fed President Raphael Bostic acknowledged that the labor market is slowing from previously strong levels. He emphasized that inflation risks remain more pressing than employment concerns and reiterated his support for just one rate cut, maintaining a broadly hawkish stance.
- The ISM Manufacturing PMI declined to 48.0 in July from 49.0, marking the fifth consecutive month of contraction after two brief months of expansion that followed a prolonged 26-month downturn. The reading missed expectations of 49.5. Notably, the Employment sub-index contracted further, while the Prices Paid component indicated easing cost pressures.
- Meanwhile, Consumer Sentiment improved for a second straight month, though slightly below the preliminary estimate—easing to 61.7 from 61.8. Inflation expectations were revised higher for the 1-year outlook to 4.5% (from 4.4%), while the 5-year outlook fell to 3.4% from 3.6%, suggesting households remain cautiously optimistic about long-term price stability.
- Other data in the EU revealed that the HCOB Manufacturing Flash PMI in the EU improved for the whole bloc, Spain, and Italy, with the latter remaining in contractionary territory. Contrarily, Germany and France sank further into negative territory.
Technical outlook: EUR/USD upside clears above 1.1600, with bulls eyeing 1.1650
The formation of a ‘morning star’ candlestick chart pattern indicates that the EUR/USD might resume its uptrend, but it would face key resistance at 1.1600. The Relative Strength Index (RSI) bounced off nearly oversold territory, closing into its neutral line. That said, a cross above 50 would confirm that buyers are in charge.
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