Euro started the week under pressure from US statistics
The euro starts the new trading week under the influence of American macroeconomic statistics. The currency market's special attention is focused on US employment data published last Friday, November 6. The state of the American labor market remains one of the most important factors determining the further policy of the Federal Reserve (Fed) and the dynamics of the EUR/USD pair.
American statistics are fundamentally important for the euro: the more stable the US labor market is, the fewer grounds the Fed has for rapid monetary policy easing. This supports the dollar and, accordingly, limits the growth potential of the European currency.
The American labor market surprised
According to the US Labor Department report published on November 6, the number of new nonfarm payrolls increased by 165,000 in October. This is almost three times higher than analysts' forecast of an increase of about 65,000. Equally important was the decline in unemployment: the indicator dropped from 4.2% to 4.1%. Moreover, data for previous months were revised upward. Average hourly wages rose 0.4% over the month and 3.1% on an annual basis.
The currency market's reaction was quite predictable. Strong statistics strengthened the US dollar positions: the DXY index after the report rose by about 0.7%, reaching 102.22. The EUR/USD pair, on the contrary, went down, approaching the 1.1150 level.
For market participants, these figures became a signal that the American economy remains resilient, and the Fed still has room for further monetary policy tightening.
What's next for the euro?
Now investors' attention is shifting to the prospects of the Fed's December meeting. After the statistics release, the probability of a US interest rate hike in December, according to market estimates, increased to about 78% versus 70% before the report.
This creates additional risks for the euro. If US inflation remains high and the labor market continues to show resilience, the dollar may receive new support. In that case, the EUR/USD pair risks continuing its decline.
At the same time, relying solely on American statistics is not advisable. The European currency will be influenced by the eurozone's own economic indicators, expectations regarding ECB policy, as well as geopolitical situation.
Thus, the US employment report became a negative factor for the euro. For now, the advantage remains on the dollar's side, and the further direction of EUR/USD will largely depend on whether the next American economic publications confirm the possibility of a Fed rate hike in December.
