EUR/USD strengthens as weak US labor data pushes cut odds to 90%

Euro extends rally as soft US employment data sinks the Dollar, while improving Eurozone PMIs bolster the bullish momentum

The Dollar extended its losses as employment data revealed that private companies cut jobs at the fastest pace since 2023, revealed an ADP report. Given the backdrop, money markets priced in a 90% probability of a 25-basis point (bps) rate cut, next week.

Consequently, the EUR/USD’s rally continued, despite that business activity in the services sector in the US expanded in November, according to the Institute for Supply Management (ISM).

In Europe, the European Central Bank (ECB) President Christine Lagarde commented that “indicators of underlying inflation remain consistent with out 2% medium-term target,” adding that the bank expect inflation to stay near its 2% goal “in the coming months.”

Data wise, HCOB Services and Composite PMIs for the Eurozone improved in November. Germany and France’s PMIs expanded as well, while in Spain, the HCOB Services PMI signaled a mild slowdown, expanding at a lower rate compared to October.

EU and US data ahead

EUR/USD traders would be eying the release of Retail Sales in Europe, and speeches by ECB policymakers, led by the Vice-President Luis de Guindos. In the US, the schedule will feature November’s Challenger Job Cuts and Initial Jobless Claims for the week ending November 29.

Euro Price This week

The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.61%	-0.84%	-0.57%	-0.19%	-0.83%	-0.79%	-0.48%
EUR	0.61%		-0.25%	0.04%	0.41%	-0.23%	-0.20%	0.13%
GBP	0.84%	0.25%		0.54%	0.66%	0.02%	0.05%	0.38%
JPY	0.57%	-0.04%	-0.54%		0.39%	-0.27%	-0.20%	0.10%
CAD	0.19%	-0.41%	-0.66%	-0.39%		-0.69%	-0.61%	-0.28%
AUD	0.83%	0.23%	-0.02%	0.27%	0.69%		0.03%	0.35%
NZD	0.79%	0.20%	-0.05%	0.20%	0.61%	-0.03%		0.33%
CHF	0.48%	-0.13%	-0.38%	-0.10%	0.28%	-0.35%	-0.33%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Daily market movers: Euro's boosted by mixed US data

US data barely boosted the Greenback after the ADP National Employment Change showed that private payrolls tumbled -32K in November, missing forecasts for a 10K gain. The data evidenced the deterioration in the US jobs market, reinforcing bets the Federal Reserve will cut interest rates next week.
The ISM Services PMI in November, surpassed the consensus picking up to 52.6 up from 52.4 beating forecasts of 52.1 revealed an expansion in the sector.
The Eurozone HCOB Services PMI was updated to 53.6 from 53.1, marking its fourth straight monthly gain and highest level since May 2023.

Technical analysis: EUR/USD clears 1.1650, eyes on 1.1700

EUR/USD has remained steady for three consecutive days, but finally broke above 1.1650, opening a new trading range between the latter and the 1.1700 print. Therefore, as buyers gain momentum as depicted by the Relative Strength Index (RSI), a test of the year-to-date (YTD) of 1.1918 seems far towards the year’s end. Still a move to 1.1800 is likely.

On the downside, If EUR/USD falls below 1.1650, its first support is the 50-day SMA At 1.1610, followed by the 20-day SMA at 1.1580, and 1.1500.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.