The EUR/USD pair managed to edge higher as the US Dollar lost its strength late on Thursday, supported by mixed macroeconomic data releases from the US and an improvement in risk sentiment. Early on Friday, Euro Stoxx 50 rose by 0.5%, and US stock index futures traded in the green, helping the pair maintain its position.
Looking ahead, all eyes are on the highly anticipated Nonfarm Payrolls (NFP) report from the US for July. Economists expect NFP to rise by 200,000, following the 209,000 increase recorded in June. Additionally, annual wage inflation is expected to edge lower to 4.2%, while the Unemployment Rate is projected to remain steady at 3.6%.
Federal Reserve Chairman Jerome Powell has reiterated the central bank’s data-dependent approach to monetary policy following the July meeting. The market is currently pricing in a 30% probability of the Fed raising its policy rate one more time by 25 basis points before the end of the year. The NFP print will be a key factor in shaping the market’s expectations for future Fed actions.
An upbeat NFP figure, reaching or exceeding 250,000, could bolster hawkish Fed expectations and provide a boost to the US Dollar. Conversely, a weak NFP reading, nearing 150,000, might have a negative impact on the USD’s valuation.
In the event that the NFP report comes in line with market forecasts, investors are likely to closely scrutinize the wage inflation data. Any unexpected increase in annual wage inflation could help the USD maintain its resilience against the Euro.
Overall, the EUR/USD pair faces a volatile trading environment as market participants eagerly await the NFP report’s release, which is expected to have a significant impact on the US Dollar’s trajectory.
