Euro Calm Ahead of US Nonfarm Payrolls

11/03/2023

1 minute read

2023.11.03 06:52

MarketPulse

US nonfarm payrolls expected to ease to 170,000

The is showing limited movement on Friday after posting strong gains a day earlier. In the European session, EUR/USD is trading at 1.0633, up 0.10%.

All Eyes on US Nonfarm Payrolls

The has been under broad pressure since the Federal Reserve decision on Wednesday. The Fed statement was pretty much a repeat of the one in September and Fed Chair Powell reiterated that rate hikes were still on the table. The markets didn’t buy into Powell’s comments and expectations are rising that the Fed is done with tightening. The ADP Employment Change report, which isn’t considered a reliable gauge for nonfarm payrolls but is still closely watched, posted a weak gain of 113,000 in October, well below the market consensus of 150,000 and following the September reading of 89,000.

Will nonfarm payrolls follow suit with a weaker-than-expected release? Nonfarm payrolls posted a massive gain of 336,000 in September but the market consensus for October is just 170,000. If nonfarm payrolls miss expectations, it would likely mean that the current tightening cycle is over and done with. Conversely, a surprise to the upside would add credibility to the Fed’s stance that the economy remains strong and that rate hikes remain on the table. I would expect the US dollar to post gains if nonfarm payrolls beat expectations.

The Fed will also be keeping an eye on wage growth, a driver of inflation. Wages rose 0.2% m/m in September and the market estimate for October stands at 0.3%. On an annualized basis, wage growth is expected to ease to 4.0% in October, down from 4.2% in September.

In the eurozone, today’s numbers were soft, yet another reminder of the weak economy. French Industrial Production declined 0.5% m/m in September, after a revised -0.1% reading in August and missing the market consensus of 0.0%. Spanish unemployment change jumped to 36,900 in October, up from 19,800 in September and the highest level since April.

EUR/USD-4-Hour Chart