EUR/USD falters after strong US NFP data, traders bet on Fed rate hike in July

• US Adds 339,000 Jobs, Beating Estimates; EUR/USD falls 0.43%.
• The Fed’s hawkish outlook points to a possible FFR hike in July.
• Positive economic indicators in Europe, such as industrial production in Italy and the variation in unemployment in Spain.

The pair EUR/USD It plunges from weekly highs hit as a knee-jerk reaction to the strong US jobs report, taking the pair towards 1.0779 before falling to daily lows. The US labor market remained strong but showed slight signs of weakness. At the time of writing these lines, the EUR/USD pair is trading at 1.0715, down 0.43%.

EUR/USD shows weak response to strong US jobs data; future US Federal Reserve rate decisions looming.

In early trading, before the Wall Street open, the US Department of Labor released May employment numbers, with the economy adding 339,000 jobs, above estimates of 190,000. Although the data is positive for the economy, the unemployment rate rose to 3.7%, from a 53-year low (3.4%), which the Fed considers a sign that could undermine consumer spending. Median hourly earnings rose 0.3%, or 4.3% year-on-year, down from 4.4% in April.

Against this background, traders expect the US Federal Reserve (Fed), despite not attending the June monetary policy meeting, to raise the Federal Funds Rate (FFR) again in July to 5.25%-5.50% zone. However, the rising unemployment rate would make it easier for the Fed, which is struggling to rein in high inflation and double its target.

Since the data release, the EUR/USD pair has lost 40 points or 0.40% intraday, threatening to approach the 1.0700 area as the dollar limps. The Dollar Index (DXY) rises 0.44%, back above the 104,000 figure.

Events that have grabbed the headlines over the past two weeks, such as the US debt ceiling crisis, were resolved late Thursday night, with the bill passing by the US Senate. USA, which will be signed by US President Joe Biden. The ceiling would rise, although we would attend the same soap opera on January 1, 2025.

On the other hand, the Minutes of the last meeting of the European Central Bank (ECB) showed that the hawks wanted a cut of 50 basis points, but the “consensus” voted in favor of a cut of 25 basis points at the expense of a greater future hardening. Regarding economic data, the agenda showed industrial production in Italy of 0.8% m/m, above estimates of 0.3%, while the variation in unemployment in Spain reached -49,300, above forecasts of -40,100 .

EUR/USD technical levels