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EUR/USD Investors Struggle Near 1.0900 Ahead Of The US NFP Report And ECB President Lagarde's Speech
The EUR/USD fails to recover from a three-week low ahead of major catalysts. Euro purchasers applaud the ECB's more hawkish stance than the Fed amid mixed EU and US data. US employment indicators heighten traders' apprehension ahead of NFP, despite the fact that the Fed's 0.25 percentage point rate hike in July is all but assured. To persuade Euro investors, ECB President Lagarde must dispel fears of policy pivot and German recession.
EUR/USD accurately reflects the pre-NFP apprehension as it maintains a defensive stance near 1.0890 in the early hours of Friday, following an outstanding recovery from a three-week low the day before. In addition to the US employment report, a speech by the president of the European Central Bank (ECB), Christine Lagarde, increases the significance of today's trading for market participants.
It should be noted that the relative hawkishness of ECB policymakers relative to those of the Fed allowed the Euro pair to recover the day before, despite the fact that data from both the Eurozone and the United States appeared muddled.
Eurozone Retail Sales for May are revised to 0.0% MoM and -2.9% YoY on Thursday, versus 0.2% and -2.7% respectively. However, Germany's Factory Orders increase 6.4% month-over-month in May, compared to 1.5% expected and -0.4% previously, while annual figures improve to -4.3% from -9.0% previously reported.
In contrast, the US ADP Employment Change for June recorded the largest one-month increase since February 2022, rising to 497K from 228K expected and 267K previously (revised). In addition, the ISM Services PMI increased to 53.9 in June from 50.3 in May, exceeding market expectations of 51.0. In addition, the Challenges Job Cuts decreases to 40,709K from previous readings of 80,089K. However, the JOLTS Job Openings decrease from 10.103 million to 9.8 million, compared to analysts' prediction of 9.93 million. Initial Jobless Claims also increased to 248K for the week ending June 30, compared to 245K expected and 236K previous readings (revised).
Notably, interest rate futures indicate a nearly 85% possibility of a 0.25 percentage point increase in interest rates from both the ECB and the Fed at their July monetary policy meeting. However, the likelihood of a policy reversal has increased since the US central bank halted its rate hike trajectory in July.
Alternately, the impending German recession agitates ECB hawks, even if the majority of them continue to support further rate increases at least through 2023.
Elsewhere, geopolitical anxieties emanating from China and the dragon nation's economic concerns join strong Treasury bond yields in the United States and Europe to stimulate the EUR/USD bulls. However, the negative performance of Wall Street benchmarks also reflects the market's aversion to risk. However, the US Dollar Index (DXY) does not reflect the safe-haven status as market participants await the headline Nonfarm Payrolls (NFP) report, which is anticipated to decline to 225K from 339K. If the employment report is positive and ECB's Lagarde fails to defend the hawkish bias, the EUR/USD could experience fresh losses.
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