EUR/USD shows limited reaction to upbeat US jobs report amid thin holiday liquidity

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EUR/USD trades in a tight range on Friday as a stronger-than-expected US Nonfarm Payrolls (NFP) report lends support to the US Dollar (USD), while the Euro (EUR) holds relatively steady amid thin liquidity conditions due to the Good Friday holiday.

EUR/USD remains on the back foot after stronger US jobs data.
Thin liquidity due to the Good Friday holiday keeps price action muted.
US NFP tops forecasts while Unemployment Rate declines.

At the time of writing, the pair trades around 1.1534, remaining on the back foot for the second straight day after rising to a one-week high of 1.1627 on Wednesday. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is hovering near the 100 mark.

According to data released by the US Bureau of Labor Statistics, the US economy added 178K jobs in March, beating expectations of 60K. February’s figure was also revised lower to show a loss of 133K jobs, deeper than the previously reported decline of 92K. At the same time, the Unemployment Rate edged lower to 4.3% from 4.4%.

However, wage growth showed signs of moderation. Average Hourly Earnings rose by 0.2% MoM in March, below the 0.3% forecast and easing from 0.4% previously. On an annual basis, earnings increased by 3.5%, missing expectations of 3.7% and slowing from 3.8%.

The data showed labor market conditions remain resilient overall, despite choppy trends in recent months, and reinforced expectations that the Federal Reserve (Fed) has room to keep interest rates unchanged for longer.

Markets have largely priced out rate cut bets since the US–Israel war with Iran erupted, as Oil-driven inflation risks intensified, and the latest labor data reinforces that view.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.