The euro saw a slight increase of 0.12% as traders held a positive outlook regarding the ongoing US-Iran discussions, which, notably, remained uninterrupted. This sentiment was shared by Pakistan’s foreign minister in a recent conversation with journalist Malik. While new data seems to bolster the concept of American exceptionalism, it hasn’t done much for the dollar, probably because of disappointing employment figures released just ahead of Friday’s non-farm jobs report.
Geopolitical issues overshadow economic data
The market atmosphere remains mixed, influenced by the U.S. stock market. Investors appear to be moving away from tech stocks and diversifying into other sectors, pushing the Dow Jones towards a potential record high. In a separate matter, the conflict in the Middle East is ongoing, as President Trump attempted to mediate a ceasefire between Israel and Lebanon. However, the ceasefire remains rather tenuous, with Israeli attacks continuing in southern Lebanon. The Iranian-backed group Hezbollah rejected the ceasefire proposal, while Israeli forces have clearly indicated their intention to stay put.
US data pressures USD despite Fed comments
Job data earlier revealed a slight decrease, with the number of Americans applying for unemployment benefits rising to 225,000 for the week ending May 30, surpassing the anticipated 213,000. Simultaneously, U.S. Challenger job cuts increased from 83,837 to 97,000 in May, marking a 16% climb from April. As a result, the US dollar weakened, influenced by the forthcoming non-farm payroll data and declining oil prices. The US Dollar Index (DXY), gauging the dollar’s performance against six currencies, dipped by 0.13% to 99.42.
“Inflation is too high,” remarked Kansas City Fed’s Jeffrey Schmidt. He noted that inflation poses a substantial risk to the US economy, leading to the question of whether the Fed should be patient with interest rates or take action sooner.
Stagflation concerns in Europe, a hawkish stance from the ECB
Meanwhile, Europe finds itself in a different situation, with many economic indicators trending downwards. The Citigroup Economic Surprise Index for the euro area has dropped to -45.2 as of June 3, signifying that economic indicators are falling short of expectations, casting doubt on sections of the European Union. The growth rate for the EU economy in the first quarter of 2026 was only 0.1%, down from 0.2% and 0.3% in the preceding two quarters, revealing a slowdown amidst rising costs linked to the energy shock stemming from the Iran conflict (the HICP surged to 3.2% year-on-year).
Nonetheless, policymakers at the European Central Bank (ECB) continue to advocate for raising interest rates due to ongoing inflation, driven by energy supply disruptions. Key figures from the ECB, including Wunsch, Shimkas, Stournaras, Schnabel, and Nagel, have backed a rate hike during next week’s monetary policy meeting.
Looking ahead
In the U.S., nonfarm payrolls are forecasted to ease from 115,000 to about 85,000 in May, aligning with the median estimate, while the unemployment rate is expected to remain at 4.3%. Over in Europe, GDP figures for the first quarter of 2026 are projected to hold steady at 0.1% quarter-on-quarter and 0.8% year-on-year compared to the previous data.
EUR/USD technical analysis
The EUR/USD exchange rate is mostly moving sideways, with increases limited by major simple moving averages (SMAs). The 20-day SMA is the first resistance point at 1.1645, succeeded by the 50-day SMA at 1.1670, and the critical long-term 200-day SMA at 1.1679. Should we break through these levels, we might approach the 100-day SMA at 1.1696 before challenging the 1.1700 mark.
On the downside, initial support is found at the May 21 daily low of 1.1576. If this level fails, the next target becomes the April 6 low at 1.1505, followed by the swing low from March 30 at 1.1443.
