- August’s non-farm payroll data indicates a decline in employment, an increase in unemployment rates, and stable wage growth.
- The US two-year Treasury yields are projected to drop as markets fully anticipate interest rate cuts in September, with the DXY declining by 0.70% to 97.57.
- Traders will look to the upcoming US CPI report for insights, while Q2 EU GDP figures were slightly revised upward.
The EUR/USD experienced a boost during the North American trading session after the recent employment report revealed a weakening labor market in the US. Consequently, investors moved away from the US dollar, as expectations grew for a Federal Reserve rate cut. The currency pair rose by 0.50%, reaching 1.1714.
US Employment Data Miss Sparks Treasury Drop, Dollar Decline
The Non-Farm Payrolls (NFP) report revealed that job growth in the US was below expectations, eliciting a significant market reaction. Initially, US stocks saw gains, but concerns about a more pronounced economic downturn led to a retreat to safer assets, resulting in Wall Street closing in negative territory.
The additional employment data reflected upward revisions for June, with rising unemployment and unchanged average hourly earnings. Following this, the two-year US T-Note yield plummeted as investors adjusted their expectations for Fed rate cuts in the upcoming September meeting.
This deterioration led to a notable decline in the greenback. The US Dollar Index (DXY), tracking the dollar’s performance against a basket of currencies, fell by 0.70% to 97.57.
The Chicago Federal Reserve President indicated that the September meeting remains crucial for decision-making. Meanwhile, Treasury Secretary Scott Bescent emphasized the importance of maintaining public trust in the Fed’s actions.
In the wake of the employment report, traders’ attentions will now shift to the upcoming US Consumer Price Index (CPI) data next week. If findings align with trends, it could bolster the case for rate cuts at the September 16-17 meeting.
Across the Atlantic, GDP figures for the second quarter of 2025 were adjusted slightly higher. Quarterly economic growth remained consistent with prior reports.
Daily Digest Market Mover: Fed Rate Cuts Lift Euro
- Following the Bureau of Labor Statistics announcement in August, which stated only 22,000 jobs were created—far below the expected 75,000—average hourly earnings rose by 0.3%. Unemployment ticked up from 4.2% to 4.3%.
- As a result, futures linked to the December 2025 Fed fund rate indicate a potential cut of about 65 basis points by the year’s end.
- Leading into the September Fed meeting, the market reflects a 100% chance of a 25 basis point cut and a 14% chance for a 50 basis point reduction, prior to the release of the CPI in August.
- The EU’s GDP for Q2 of 2025 maintained a growth of 0.1% quarter-over-quarter, and year-over-year growth was measured at 1.5%, slightly above earlier estimates.
- Germany’s economy shows early signs of recovery from a prolonged slump, according to the German Institute for Economic Studies (DIW Berlin).
- Expectations for Fed rate cuts at the September meeting are climbing, with a 10% chance of a 25 basis point and a 50 basis point cut predicted. The European Central Bank (ECB) also has a 91% likelihood of a cut, with a chance of maintaining current rates.
Technical Outlook: EUR/USD Likely to Exceed 1.1700 This Week
The EUR/USD pair moved above 1.1700 and slightly retraced after reaching a five-week high at 1.1759. Momentum indicators suggest the buyers may continue to dominate, as indicated by the relative strength index (RSI).
The next resistance for the EUR/USD is anticipated at 1.1759, then 1.1800. A breach there could lead to testing earlier highs around 1.1829. Conversely, if daily closes fall below 1.1700, it might set the stage for a drop towards 1.1650 or even 1.1600, with the 100-day simple moving average further out at 1.1526.
