**EUR/USD Skyrockets as Weak US Jobs Data Triggers Fed Rate Cut Speculation**
*Based on the original article by Felipe Erazo at FXStreet, with additional market analysis.*
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The EUR/USD currency pair experienced a significant surge in response to disappointing US employment data, igniting a new round of speculation that the Federal Reserve could cut interest rates sooner than previously anticipated. As the world’s most-traded currency pair, shifts in EUR/USD have wide-ranging effects across global financial markets. This move underscores the heightened sensitivity of foreign exchange participants to macroeconomic data and signals from global central banks.
This in-depth analysis reviews the key factors behind the recent EUR/USD rally, explores what the labor data means for monetary policy outlook, and breaks down potential scenarios for both forex traders and investors.
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**Key Highlights:**
– US Nonfarm Payrolls for June came in well below expectations
– The unemployment rate in the US has risen, reflecting a cooling labor market
– Markets have increased bets that the Federal Reserve will begin cutting rates as soon as September
– The euro benefited from broader dollar weakness, posting its strongest session in weeks
– Technical and fundamental indicators suggest more volatility ahead
– Market participants will now focus on upcoming inflation data and central bank commentary
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### US Jobs Data Disappoints Markets
The latest Nonfarm Payrolls report, released by the US Bureau of Labor Statistics, indicated that US job creation remained positive but missed consensus forecasts. According to the data, the US economy added 206,000 jobs in June, slightly above the revised figure of 218,000 for May but below forecasts for a stronger figure.
– The unemployment rate ticked up from 4.0% to 4.1%
– Average hourly earnings grew by 0.3% month-on-month, meeting expectations
– Labor force participation remained steady at 62.6%
The combination of lower job creation and a rising jobless rate suggests the labor market is gradually cooling after a period of strong post-pandemic growth. For market participants, these signs of softening created speculation that the Federal Reserve may pivot toward easing monetary policy sooner than previously anticipated.
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### Fed Rate Cut Expectations Surge
In the aftermath of the jobs report, interest rate futures saw a sharp repricing. Traders now widely expect that the Federal Reserve could begin lowering the federal funds rate as early as its September 2024 policy meeting.
Key factors supporting this expectation include:
– The three-month trend in payrolls is notably lower than earlier in the year
– Weakening labor market indicators have reduced the risk of wage inflation
– Core PCE inflation, the Fed’s preferred gauge, has shown signs of moderating
According to CME’s FedWatch tool, the probability of a 25 basis point rate cut in September rose above 75% following the data release. Before the report, these odds were below 60%.
The shift in expectations has triggered a selloff in the US dollar across major pairs,
Read more on AUD/USD trading.