Euro benefits from lower than expected US jobs data

Despite poor US GDP and employment market data, the EUR/USD pair is up 0.38 percent, suggesting that the Fed may delay raising interest rates. In addition to strengthening the Euro, the US Dollar Index declines to 103.187 as US Treasury note yields also retreat.

German HICP surpasses expectations, supporting the Euro and paving the way for a potential run at the 1.1000 mark. As a result of falling US Treasury bond yields brought on by worse US economic statistics, the Euro makes significant gains relative to the US Dollar (USD), raising the possibility that the US central bank would maintain current interest rates for the balance of the year.

Even though month-end flows typically support the US dollar, the EUR/USD traded at 1.0919 late in the US trading session, up more than 0.36 percent. However, signals of an economic slowdown and high inflation reported in Germany put the common currency in the lead.

Given comments made by US Federal Reserve Chair Jerome Powell suggesting that an active employment market and above-trend economic growth could justify rate increases by the Fed, statistics during the past several days verified Powell’s justifications for not raising rates.

With Initial Jobless Claims coming out ahead of Friday’s US Nonfarm Payrolls report, the August ADP National Employment report, which was expected to come in at 195K, came in at 177K, supporting Tuesday’s JOLTs report, which started the trend of dismal jobs data that may continue tomorrow.

The US Department of Commerce also revealed that the US economy is starting to stall as the second estimate for Q2’s Gross Domestic Product (GDP) came in at 2.1%, falling short of the 2.4% estimate that had previously been released.

US Treasury bond yields reflect how the market responded to the data, with most moving lower while reversing their earlier declines. Consequently, the US Dollar Index (DXY), which is down 0.29% at 103.187, indicates that the US Dollar is under pressure.

Across the Atlantic, the Euro was boosted by the German Harmonised Index of Consumer Prices (HICP), increasing monthly and annually based figures. Month-over-month inflation was 0.4% above estimates of 0.3% and 6.4% YoY, above the 6.3% foreseen.

Given the latest fundamental data, the EUR/USD bias would remain upwards, though set for a pullback, before challenging the 1.1000 area. On the upside, the pair would find resistance at the 100-DMA at 1.0925, which might not be easy to surpass ahead of Thursday’s data.