**EUR/USD Surges as Weak US Jobs Data Boosts Fed Rate Cut Expectations**
*Adapted and expanded from an article by Matías Salord, FXStreet*
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The EUR/USD currency pair experienced a robust rally following the release of softer-than-expected nonfarm payrolls data from the United States. The disappointing jobs report has ignited speculation that the Federal Reserve could accelerate its timeline for cutting benchmark interest rates, intensifying volatility across Forex markets and propelling the euro higher against the US dollar.
### Overview: Key Developments in Euro-Dollar Trade
– The EUR/USD surged sharply after the US Department of Labor’s June employment report missed Wall Street estimates.
– Markets swiftly repriced expectations, with investors betting the Federal Reserve may lower interest rates sooner than previously anticipated.
– The US dollar weakened across major currency pairs, while the euro saw broad-based strength.
– This development reflects heightened sensitivity to economic data in the context of uncertain global growth and shifting monetary policy.
### Details of the US Jobs Report
On July 5, 2024, the US Department of Labor reported that nonfarm payrolls increased by only 180,000 in June, falling short of analyst forecasts which anticipated a gain of around 220,000. Alongside the jobs miss, the unemployment rate ticked higher from 4.0% to 4.2%. Average hourly earnings, a measure of wage inflation, rose just 0.2% month-over-month, moderating from the previous 0.4% reading.
**Key Points from the Report:**
– **Nonfarm payrolls:** +180,000 (vs. 220,000 expected)
– **Unemployment rate:** 4.2% (vs. 4.0% prior)
– **Average hourly earnings:** +0.2% m/m (vs. 0.4% prior)
– **Participation rate:** Unchanged
These numbers indicate a labor market potentially losing momentum, at odds with the robust growth seen earlier in the year.
### Market Reactions: Immediate Impact and Broader Implications
The market reaction to the jobs data was swift and decisive. EUR/USD, which had drifted lower in recent sessions on the back of relative European economic weakness, rocketed higher. Within minutes, the pair rallied from near-1.0700 to test resistance above the 1.0800 level, a move reflecting both dollar weakness and new buying interest in the euro.
**Financial Market Response:**
– **EUR/USD:** Spiked from 1.0700 to 1.0830 within an hour.
– **US Dollar Index (DXY):** Fell more than 0.6%, dropping below 104.00.
– **Yields on US Treasuries:** Two-year and ten-year yields dropped as investors bet on easier Fed policy.
– **S&P 500 Futures:** Rallied, as traders anticipated lower borrowing costs ahead.
### Why Weaker
Read more on AUD/USD trading.