- EUR/USD will lose ground to near 1.1290 in early Asian session on Friday.
- The US is seeking a tariff talks with China, raising hopes for a de-escalation trade war.
- Traders are waiting for the US April non-farm salary report later Friday.
EUR/USD During the early Asian sessions on Friday, the pair softens to about 1.1290. The US Dollar (USD) shows a higher edge against the EUR amid optimism about escalation in the world trade conflict. All eyes will be made in April in the US Non-farm salaries (NFP) Report. This is scheduled for the second half of Friday.
A social media account belonging to China's state media said Thursday US (US) contacted Tochina to begin negotiations on President Donald Trump's 145% tariffs. US officials, including Treasury Secretary Scott Bescent and White House economic adviser Kevin Hassett, also expressed their hopes of alleviating trade tensions. This provides support for the greenback and creates headwinds for the main pair.
The US data released on Thursday was mixed. According to the U.S. Department of Labor, the first US unemployment claims for the week ended April 26th increased by 241,000 compared to the previous week's 223,000 (revised from 222,000). This figure exceeds the market consensus of 224,000. Meanwhile, the Purchasing Manager Index (PMI) for ISM Manufacturing fell from 49.0 in March to 48.7 in April, breaking market expectations.
At the euro frontline, traders are priced roughly at a 25 basis points (BPS) rate. European Central Bank (ECB) Policy meeting in June. ECB officials are forecasting further slowdowns in inflation and economic growth in response to tariffs imposed by the US on their trading partners. Further increases in ECB rate reductions could put pressure on shared currencies in the short term.
The US April employment report will take center stage later Friday. The US is expected to add 130,000 new positions in April, but it is estimated that the unemployment rate will remain at 4.2%, which remains unchanged from March. For softer reading than expected, this could damage the US dollar against the EUR.
Employment FAQ
Labor market conditions are an important factor in assessing economic health and therefore an important driver of currency valuation. High employment, or low unemployment, has positive implications for consumer spending and economic growth, increasing the value of the local currency. Furthermore, a very tough labor market – a situation where workers are short on workers to fill open positions – can also affect low labor supply and monetary policy as high demand, resulting in higher wages.
The pace of wages growing in the economy is important for policymakers. Wage growth means households spend more money, usually leading to higher prices of consumer goods. In contrast to more volatile sources of inflation, such as energy prices, wage growth is considered a key component of fundamental and sustained inflation, as it is unlikely that wage increases will be cancelled. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weights each central bank assigns to labor market conditions depends on its purpose. Some central banks explicitly have labor market-related obligations, not only to control inflation levels. The Federal Reserve, for example, has a dual mission to promote maximum employment and stable prices. Meanwhile, the only task of the European Central Bank (ECB) is to manage inflation. Yet, whatever their obligations are, labor market conditions are an important factor for policymakers given their importance as a direct relationship between economic health and inflation.
