EURUSD falls from 1.0900 as a positive US NFP report for May improves the dollar’s appeal.

The EURUSD fell sharply to roughly 1.0840 in Friday’s New York session. After the United States Nonfarm Payrolls (NFP) report for May showed. That labor demand and wage growth were higher than expected. The Employment report showed that fresh payrolls added by US firms were 272K. Above forecasts of 185K payrolls and the previous release of 165K. Which was revised lower from 175K. However, the unemployment rate Increased to 4.0% from projections and the previous announcement of 3.9%.

The US NFP report indicates that labor market conditions have tightened further.

Higher-than-anticipated payroll data are expected to dispel concerns about reducing labor demand. Which arose after recent employment-related indicators revealed that the job market is tightening. JOLTS Job Openings statistics for April and ADP Employment Change for May were worse than predicted. Furthermore, initial jobless claims for the week ending May 31 were higher than expected, implying that some heat has been removed from the labor market.

Meanwhile, Average Hourly Earnings, which measures wage inflation, rose to 4.1% from 3.9% expected and the previous report of 4.0%. Which was revised up from 3.9% year on year. On a monthly basis, the wage inflation indicator increased at a robust rate of 0.4%
Compared to the consensus of 0.3% and the previous figure of 0.2%. This has heightened concerns about inflation continuing persistent. Which will have a negative impact on market expectations for the Federal Reserve (Fed) to begin lowering interest rates at the September meeting.

Daily Market movers: EURUSD drops. The US dollar surges.

EURUSD is expected to fall sharply from 1.0900 after a good US NFP report indicated that the Fed may not contemplate lowering interest rates at its September meeting.
On the other side of the Atlantic, the Euro falls as the European Central Bank (ECB) reduced interest rates by 25 basis points (bps) on Thursday, as expected.
The ECB dropped its benchmark borrowing rates for the first time since 2019, as officials were optimistic of Inflation is decreasing towards the anticipated rate of 2%. Except for policymaker Robert Holzmann, who dissented, all officials voted in favor of lowering interest rates. However, ECB President Christine Lagarde refused to commit to a precise interest rate path, stating that the fight against inflation is far from over and that price pressures are projected to remain at present levels this year. She said the ECB will continue to rely on data.

The ECB launched its policy easing effort without committing to a certain interest-rate path.

According to the ECB staff’s most recent inflation projections, annual core inflation in the Eurozone would average 2.8% in 2024, 2.2% in 2025, and 2.0% in 2026, which is slightly higher than earlier estimates.
The ECB was likely to remain data-dependent, since the last Eurozone’s Harmonized Index of Consumer Prices (HICP) report revealed that annual headline. And core inflation increased higher than expected. Economic growth in Q1 was also stronger, at 0.3%. Indicating that the technical recession in the second half of 2023 was brief.