The EURUSD pair edged lower in Thursday’s American session, trading around 1.1645 as the US Dollar regained traction. After a sharp rally earlier in the week, the Euro faced selling pressure, driven by disappointing Eurozone retail data and a modest recovery in the Greenback following labor market releases.
The ADP Employment Report showed that US private payrolls increased by only 54,000 in August, missing expectations of 65,000 and sharply lower than July’s revised 106,000. This weaker pace of job creation suggested that US labor market momentum is cooling.
At the same time, Initial Jobless Claims rose to 237,000 from 229,000, pointing to a slight uptick in layoffs. However, the labor market report was not entirely negative Q2 Nonfarm Productivity was revised higher to 3.3% from 2.4%, while Unit Labor Costs eased to 1.0% compared to the 1.6% forecast. These improvements indicate rising efficiency and cooling wage pressures, which could be supportive for inflation moderation in the medium term.
DXY Back on the Rise
The US Dollar Index (DXY), which tracks the greenback against six major currencies, bounced back toward 98.30 after a brief dip earlier in the week. The index remains range-bound, reflecting cautious positioning ahead of Friday’s Nonfarm Payrolls (NFP) report.
This recovery suggests that despite softer jobs data, the Dollar retains a safe-haven bid as investors remain wary of inflation, growth uncertainty, and global risks. Traders are reluctant to push the Dollar significantly lower without confirmation from Friday’s key employment data.
Eurozone Retail Sales Signal Demand Weakness
On the Euro side, the macroeconomic picture turned more fragile. Eurozone Retail Sales fell 0.5% MoM in July, deeper than the expected 0.2% decline, and reversing June’s 0.6% rise. Year-on-year growth slowed to 2.2%, missing the 2.4% forecast and well below the prior 3.5%.
These figures underline weakening household consumption across the bloc, a troubling sign as the European Central Bank (ECB) seeks to balance inflation control with growth stability. With inflation still slightly above the ECB’s 2% target, policymakers may face a dilemma if demand continues to soften while prices remain sticky.
The Euro’s inability to hold gains against the Dollar highlights investor concerns that the Eurozone economy is losing resilience just as the US economy shows mixed but relatively firmer momentum.
Services PMIs in Focus
Looking ahead, the focus turns to US services sector data. The S&P Global Services PMI is projected to remain steady at 55.4, indicating strong expansion. Meanwhile, the ISM Services PMI is expected to tick higher to 51.0 from 50.1.
The ISM report will also provide detailed insights into Employment, New Orders, and Prices Paid subcomponents that could shape expectations for inflation trends and Fed policy.
If services momentum remains intact, it could reinforce the narrative of a resilient US economy, supporting the Dollar further. Conversely, a sharp downside surprise could weigh on the Greenback, offering EURUSD some room to recover.
Market Outlook
The near-term direction of EURUSD hinges on two critical data points: Thursday’s PMI surveys and Friday’s NFP report. Traders will assess whether the US labor market slowdown is temporary or part of a deeper trend.
A soft NFP report could revive bets on Fed policy easing, undermining Dollar strength.
A resilient NFP print could bolster the Dollar, keeping EURUSD under pressure.
For the Euro, weak retail data underscores vulnerability. Unless Eurozone indicators show stabilization, the single currency may struggle to sustain rallies.
Conclusion
The EURUSD retreat on Thursday reflects the Dollar’s rebound as mixed US labor data and weak Eurozone retail figures tilted momentum in favor of the Greenback. With markets in “wait-and-see” mode, all eyes are now on US PMI data and Friday’s Nonfarm Payrolls, which will likely set the tone for the next leg in EURUSD.
For traders, the key question remains: will the Dollar’s resilience hold, or will softer US labor signals eventually break its momentum? The answer lies in the data ahead.
