Title: US Dollar Retreats on Weaker Economic Indicators: Key Analysis for EUR/USD, GBP/USD, USD/CAD, and USD/JPY
Author: Based on the original article by Vladimir Zernov, FX Empire
The US dollar faced renewed pressure as a significant drop in job openings, represented by the JOLTS (Job Openings and Labor Turnover Survey) data, heightened concerns of a slowdown in the American labor market. This realignment in the greenback’s trajectory influenced major currency pairs, such as EUR/USD, GBP/USD, USD/CAD, and USD/JPY. As traders reassess prospects of Federal Reserve monetary policy amidst softening macroeconomic signals, the forex market experienced widespread volatility.
This article provides a comprehensive breakdown of the latest currency market response following the JOLTS report, focusing on how the dollar reacted across key currency majors. Supplementary economic insights from the Bureau of Labor Statistics, Federal Reserve commentary, and recent inflation data from Europe and the UK are also included to offer extended context to currency fluctuations.
Overview of the JOLTS Data and US Dollar Reaction
The most recent JOLTS report showed that US job openings dropped to 8.059 million in April, a sharp decline from the previous reading of 8.355 million. This marked the lowest level since February 2021. Markets perceived the report as a sign of cooling labor demand, placing downward pressure on the dollar.
Key data points from the JOLTS Report:
– Total job openings: 8.059 million (Down from 8.355 million)
– The hiring rate decreased to 3.5 percent
– There was a slight drop in quits and layoffs, indicating reduced worker confidence in job switching opportunities
This data added to a series of softening labor market metrics, which include rising continuing jobless claims and modest growth in nonfarm payrolls. As labor conditions moderate, investors anticipate the Fed may pivot to a more accommodative stance in the coming months.
Reaction in Interest Rate Markets:
– Federal Funds Futures now price in a higher probability of a rate cut by September 2024
– The ten-year US Treasury yield fell below 4.30 percent as capital rotated into bonds
EUR/USD: Pair Breaks Higher On Weak USD and Eurozone Inflation
The EUR/USD pair continued its upward trajectory, breaking above the 1.0880 level. Traders leaned bullish on the euro as the US dollar weakened, and softer consumer price inflation in the Eurozone did little to dent optimism.
Eurostat’s preliminary May inflation data for the Euro Area showed:
– Headline CPI rose to 2.6 percent year-over-year, up from April’s 2.4 percent
– Core inflation (excluding energy and unprocessed food) rose to 2.9 percent, exceeding expectations
Despite this uptick, the European Central Bank (ECB) is still widely expected to cut rates during upcoming meetings, likely beginning in June. The ECB has signaled a readiness to act amid an economic slowdown, even with inflation slightly above target.
EUR/USD Technical Analysis:
– Immediate resistance: 1.0915, with a possible test of 1.10 on a further breakout
– Support: 1.0825 and 1.0760, formed by previous consolidation levels
– RSI near 63 suggests strong bullish momentum without being overbought
Outlook: Market sentiment favors further euro strength in the short term, particularly if the US jobs data (Nonfarm Payrolls) continues to underperform.
GBP/USD: Sterling Gains Traction Despite Mixed UK Data
GBP/USD rallied toward the 1.2780 mark, with sterling appreciating as the dollar weakened. While UK economic data has been mixed, traders are focusing on the trajectory of US economic deceleration rather than domestic disruptions in the UK.
Recent UK Economic Highlights:
– UK services PMI fell to 52.9, suggesting slower expansion in business activity
– Inflation remains sticky, with the
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