**EUR/USD Analysis: Euro Maintains Bullish Momentum Following U.S. Jobs Data**
*Adapted and expanded from the original article by Fiona Cincotta, Forex.com*
The EUR/USD currency pair continued to exhibit a bullish bias in the aftermath of the latest U.S. Non-Farm Payrolls (NFP) report. This development underlines the broader trend in the forex markets, where monetary policy expectations, economic data releases, and geopolitical developments continue to shape investor sentiment.
Following the NFP report, the euro strengthened against the dollar, driven by a combination of softer U.S. economic indicators and growing optimism surrounding the eurozone’s economic recovery. The pair remains supported above key technical levels, suggesting further upside potential in the near term.
## U.S. Non-Farm Payrolls: Slower Job Growth Weighs on Dollar
The U.S. job market showed signs of losing momentum in the latest NFP report. According to the data released on Friday:
– The U.S. economy added 175,000 jobs in April, missing expectations of around 238,000.
– Unemployment ticked up slightly from 3.8 percent to 3.9 percent.
– Average hourly earnings grew at an annual pace of 3.9 percent, compared to 4.1 percent in the previous month.
These figures indicate that the U.S. labor market is cooling, which could ease inflationary pressures. Consequently, expectations for interest rate cuts by the Federal Reserve have risen.
Key implications of the NFP print include:
– A reduced likelihood of further Fed rate hikes.
– Increased market confidence that the Fed could begin easing monetary policy from mid to late 2024.
– A subdued U.S. dollar as treasury yields fall in response to softer data.
The dollar index fell following the release, reflecting diminished demand for the greenback as yields on U.S. Treasury bonds dropped. Meanwhile, the EUR/USD pair moved sharply higher, breaching key resistance levels.
## ECB Rate Outlook: A More Hawkish Stance?
While the Federal Reserve faces growing calls for monetary easing, the European Central Bank (ECB) remains cautious in its approach, even though markets widely anticipate a rate cut as early as June. However, stronger-than-anticipated economic indicators out of the eurozone could prompt a more reserved stance by ECB policymakers.
Recent eurozone data that have supported the euro include:
– Inflation readings remaining relatively sticky, with core inflation still above the ECB’s 2 percent target.
– GDP figures beating expectations, showing stronger growth momentum across the region.
– Business sentiment and PMI indicators displaying signs of improvement, especially in manufacturing and services.
These developments could delay the ECB’s rate-cutting timeline or result in a more measured easing cycle than previously expected. If inflation proves tougher to bring down, the central bank may opt for a gradual approach rather than aggressive cuts.
Key takeaways regarding the ECB:
– A June cut remains on the cards, but follow-through will depend heavily on incoming inflation data.
– ECB officials have signaled one cut may be warranted, but additional cuts require further evidence of subdued price growth.
– A diverging policy path between the Fed and ECB, at least in the near term, is supportive of EUR/USD upside.
## Market Reaction: Risk Sentiment Boosts Euro
In the wake of the relatively dovish NFP report, broader risk sentiment improved, further helping the euro against the defensive U.S. dollar. Equity markets rallied globally, and the yield on U.S. 10-year treasuries pulled back from recent highs. With markets pricing in higher probabilities of rate cuts, particularly in the U.S., traders favored assets sensitive to growth expectations and risk-taking.
The EUR/USD gained around 0.8 percent following the data release, climbing above 1.08 before consolidating gains. This reflects a combination of dollar weakness and modest euro strength.
Key drivers behind the euro’s recent move include:
– A reassessment of interest
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