**EUR/USD Soars as Weak US Jobs Data Fuels Fed Rate Cut Expectations**
*Based on the original article by Benjamin Jullien for FXStreet, with expanded insights and analysis from related sources.*
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## Market Overview
The EUR/USD currency pair experienced a dramatic surge as unexpectedly weak US jobs data sent ripples through global markets and ignited new speculation over the Federal Reserve’s interest rate trajectory. Disappointing figures for US nonfarm payrolls have amplified expectations for a Fed rate cut, emboldening euro bulls and pushing the pair to its highest levels in months. This development comes against a complex backdrop of shifting economic indicators and evolving central bank communications.
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## US Nonfarm Payrolls – The Catalyst
The US Bureau of Labor Statistics reported that payroll growth for July fell short of economists’ expectations. This miss catalyzed a swift and forceful reaction in currency markets as traders reassessed the likely direction of Federal Reserve policy.
– **Headline Numbers:**
– Nonfarm payrolls increased by just 185,000, compared with consensus forecasts of 200,000.
– The unemployment rate edged higher to 4 percent, up from 3.9 percent previously.
– Average hourly earnings rose by a modest 0.3 percent month-over-month, showing little acceleration in wage pressures.
The jobs report signaled a cooling US labor market, reinforcing forecasts that economic momentum is slowing after the strong growth phases seen post-pandemic.
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## Market Reaction: EUR/USD Surges
The euro soared against the dollar following the data release as traders re-priced the probability of Fed rate cuts. According to real-time data from CME’s FedWatch tool, market participants increased their bets for a September rate reduction.
– **EUR/USD Performance:**
– The pair leaped almost 0.8 percent within hours of the report.
– Technical resistance levels at 1.0900 were breached, clearing a path toward further gains.
– The move aligns with a broader dollar selloff, as the US yield curve dropped sharply on the poor jobs report.
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## Why the Data Matters
Weak employment growth often signals a cooling economy, which can alleviate the Federal Reserve’s concerns about overheating, wage-driven inflation. As a result, the FOMC could now feel comfortable lowering interest rates to prevent a potential recession. For currency traders, the implications are immediate:
– **A Dovish Fed Weakens the Dollar:** Lower rates decrease yield attractiveness of US assets, prompting outflows.
– **Euro Bounces:** The euro gains as investors seek alternatives to the US dollar, particularly if the European Central Bank maintains a more neutral stance.
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## Fed Rate Cut Expectations Soar
Prior to the jobs report, the likelihood of a September rate cut was below 50 percent. Afterward, markets are pricing in over a 60 percent chance of a reduction, with additional cuts possibly following by year-end.
Key points driving these bets include:
– Slower job creation
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