EUR/USD:US Dollar Rises on Strong Employment Report

The US dollar is having a good day against all major currencies, including the euro, thanks to the strong US employment report released on Friday. In March, nonfarm payrolls recorded a solid figure of 236,000, which was slightly lower than the upwardly revised prior figure of 326,000 but still in line with market expectations of 340,000.

Friday’s report revealed a strong job market with limited wage growth. Despite the Federal Reserve's relentless rate hikes, the job market has proven to be surprisingly resilient. However, the markets believe that the labor market is still too strong for the Fed, and that employment data needs to weaken to bring down inflation more quickly. This could mean more rate hikes are necessary before the Fed can end its current rate-tightening cycle. The CME Group now estimates the odds of a 25 basis point rate hike in May at 68%, up from around 50% before the employment report.

On Tuesday, the eurozone will release its retail sales and investor confidence data. Weak readings are expected, which could further impact the euro’s losses. Retail sales are predicted to slow down in March to -3.5% y/y, following -2.3% y/y in February. Sentix Investor Confidence, which has remained negative for a year, is projected to come in at -9.9 in April, following -11.1 the previous month.