- US Nonfarm Payrolls are forecast to rise by 175,000 in July after increasing by 206,000 in June.
- The Bureau of Labor Statistics will release its high-impact US employment report on Friday at 12:30 GMT.
- Jobs data could exacerbate the US dollar’s pain after the Fed’s dovish stance on Wednesday.
Attention now turns to July Non-Farm Payrolls (NFP) data, scheduled for release on Friday at 12:30 GMT, as markets continue to assess the US Federal Reserve’s (Fed) policy decision this week.
US labor market data is due out from the Bureau of Labor Statistics (BLS), which could hint at another interest rate cut by the Fed before the end of the year, as a September liftoff is a given. Increased US Dollar (USD) volatility is expected with the release of the data.
What to expect from the next Nonfarm Payrolls report?
The Nonfarm Payrolls report is expected to show the U.S. economy added 175,000 jobs in July, following a better-than-expected increase of 206,000 in June.
The unemployment rate is likely to remain unchanged at 4.1% over the same period. Meanwhile, a closely watched measure of wage inflation, Average Hourly Earnings, is forecast to rise 3.7% in the year to July after reporting a 3.9% increase in June.
The US labor market report is more significant this time around, especially after the Fed adjusted its July policy statement to mention that it is “vigilant to risks to both sides of its dual mandate,” rather than just pointing its attention to inflation risks.
The Fed on Wednesday held the federal funds rate at 5.25% to 5.5%, acknowledging “some progress” toward its 2% inflation target.
During the press conference, Fed Chairman Jerome Powell said that “the committee’s general sense is that the economy is approaching the point at which it would be appropriate to reduce our policy rate,” cementing a rate cut in September.
On the employment front, Powell said indicators show the labor market has gradually normalized from “overheated” conditions. While he tried to be fairly cautious with his message, his view on inflation and employment only made markets believe another rate cut could be on the table this year beyond September.
Meanwhile, the U.S. private sector saw employment rise by 122,000 in July after advancing by an upwardly revised 155,000 in June, the ADP National Employment Report showed on Wednesday. The data missed market expectations of 150,000 in the reported period. Also, the BLS reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that the number of job openings on the last business day of June stood at 8.184 million, versus the 8.03 million expected.
Ahead of the July employment situation report, TD Securities analysts said: “We expect July payrolls to be largely flat versus June, printing 200,000 at the start of the third quarter. High-frequency data suggest that job growth has continued to hold up. Separately, the unemployment rate is likely to remain unchanged at 4.1%, but the risk is that it will fall back to 4.0% after its recent increases.”
“We also expect wage growth to cool by one-tenth to 0.2% m/m, and to ease to 3.6% year-on-year,” the analysts added.
How will the US July Nonfarm Payrolls impact EUR/USD?
The Fed’s dovish outlook fueled a correction in the US Dollar (USD) across the board, while 10-year US Treasury bond yields attacked the key 4.0% level, lifting the EUR/USD pair back to the 1.0800 threshold. Will the pair sustain the rebound on key US NFP release?
An upside surprise in the headline NFP figure and wage inflation data would cool prospects for additional rate cuts this year, allowing the US dollar to catch its breath.. This, in turn, could reinforce further selling of EUR/USD back towards 1.0700. However, if the US employment data confirms looser labour market conditions and the disinflationary trend in wage inflation, the Dollar could accelerate its downward correction with further dovish bets on the Fed. In such a case, EUR/USD could extend the recovery towards the 1.0900 level.
FXStreet analyst Dhwani Mehta offers a brief technical outlook for EUR/USD:
“The EUR/USD pair faced stiff resistance at the 21-day Simple Moving Average (SMA), aligned at 1.0856 and turned back into negative territory. The 14-day Relative Strength Index (RSI) turned south below the 50 level, currently near 42, suggesting that sellers might retain control in the near term.”
“Strong support below the July low of 1.0713 is critical to trigger further declines towards the psychological barrier of 1.0650. On the other hand, buyers need to find acceptance above the 21-day SMA at 1.0856 for an extended rally towards the round figure of 1.0900. Further above, the July high of 1.0948 could be challenged,” Dhwani added.
US Dollar PRICE Today
The table below shows the exchange rate of the US Dollar (USD) against major currencies today. The US Dollar was the weakest currency against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.38% | 0.72% | -0.15% | 0.14% | 0.26% | 0.11% | -0.22% | |
| EUR | -0.38% | 0.34% | -0.53% | -0.25% | -0.10% | -0.27% | -0.60% | |
| GBP | -0.72% | -0.34% | -0.88% | -0.58% | -0.45% | -0.60% | -0.93% | |
| JPY | 0.15% | 0.53% | 0.88% | 0.28% | 0.40% | 0.20% | -0.11% | |
| CAD | -0.14% | 0.25% | 0.58% | -0.28% | 0.13% | -0.03% | -0.35% | |
| AUD | -0.26% | 0.10% | 0.45% | -0.40% | -0.13% | -0.15% | -0.48% | |
| NZD | -0.11% | 0.27% | 0.60% | -0.20% | 0.03% | 0.15% | -0.33% | |
| CHF | 0.22% | 0.60% | 0.93% | 0.11% | 0.35% | 0.48% | 0.33% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the chart will represent the USD (base)/JPY (quote).
US Dollar FAQs
The United States Dollar (USD) is the official currency of the United States of America, and the de facto currency of a significant number of other countries where it is in circulation alongside local banknotes. As of 2022, it is the most traded currency in the world, accounting for over 88% of all global foreign exchange transactions, equivalent to an average of $6.6 trillion in daily transactions. Following World War II, the USD took over from the British Pound as the world’s reserve currency.
The single most important factor influencing the value of the US dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and to promote full employment. Its main tool for achieving these two goals is to adjust interest rates. When prices rise too quickly and inflation exceeds the Fed’s 2% target, the Fed raises rates, which helps the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a jammed financial system. It is an unconventional policy measure used when credit has dried up because banks are not lending to each other (for fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE typically leads to a weakening of the US dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal of maturing securities in new purchases. It is generally positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
