Title: EUR/USD Surges Past 1.1700 as Weak US NFP Undermines Dollar and Treasury Yields
By: FXStreet News Team
Original Article By: Anil Panchal
Source: https://www.fxstreet.com/news/eur-usd-surges-above-11700-as-weak-us-nfp-drags-dollar-index-and-yields-lower-202509051254
In a significant move during Friday’s trading session, the EUR/USD pair surged beyond the 1.1700 level, bolstered primarily by the disappointing Nonfarm Payrolls (NFP) report from the United States. The report, which came in notably weaker than anticipated, prompted a broad sell-off in the US dollar while simultaneously pushing US Treasury yields lower. These developments weighed heavily on the greenback and offered room for the euro to strengthen.
The rally sheds light on the precarious state of the US labor market. Economists had expected a more robust jobs report that would support the Federal Reserve’s tightening bias. However, the soft figures point to potential easing ahead, or at the very least, a delay in any forthcoming rate hikes. This fundamental shift in expectations has created a bullish narrative for the EUR/USD in the near term.
Key Highlights
– EUR/USD broke decisively above 1.1700 in response to the weak US jobs report.
– US Nonfarm Payrolls rose by only 187,000 in August, missing the median forecast of 240,000.
– Unemployment rate ticked higher to 3.6 percent from 3.5 percent in the previous month.
– Average hourly earnings showed modest growth, printing a 0.2 percent monthly increase.
– US Dollar Index (DXY) dropped sharply, reflecting broad weakness in the USD across major pairs.
– US 10-year Treasury yield pulled back, ending a multi-day uptrend as bond markets priced out aggressive Fed tightening.
– EUR/USD technical structure turned firmly bullish with the break of the 1.1700 barrier.
Dissecting the US Jobs Report
The underlying cause of the EUR/USD spike was the soft jobs report that reignited fears about the resilience of the US economy. The nonfarm payrolls data released by the Bureau of Labor Statistics fell short of expectations. The data had the following major readings:
– NFP added just 187,000 jobs vs. the forecast of 240,000
– The unemployment rate rose to 3.6 percent
– Average hourly earnings grew 0.2 percent month-over-month, slowing down from the prior 0.3 percent
– Labor force participation rate edged up slightly but failed to compensate for slowing job creation
These figures underscore slower employment momentum in the economy, leading investors to reassess the prospect of the Federal Reserve maintaining a hawkish policy stance.
Dollar Index Crumbles Under Labor Market Disappointment
In response to the weak NFP figures, the US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, plummeted. The DXY dropped from highs of around 104.90 to as low as 103.70 within a short span after the data release.
– Market participants began pricing in a higher probability of future rate cuts rather than hikes.
– Federal Reserve expectations shifted quickly from contemplating another rate increase to staying on hold or pivoting.
– Inflation expectations pulled lower, removing one pillar of support for the US dollar.
The sell-off in the dollar provided strong tailwinds for the euro across trading platforms. Risk-on appetite also returned to financial markets, with equity indices climbing and commodity-linked currencies gaining traction.
US Treasury Yields Slide in Tandem with Dollar
Bond markets reacted sharply to the labor market data as yields slipped, reflecting changing interest rate expectations. The benchmark 10-year Treasury yield erased recent gains and traded lower.
– The 10-year yield declined by over 10 basis points post-NFP
– Yields on shorter-duration Treas
Read more on EUR/USD trading.