EUR/USD trades near 1.1627 after a US jobs report came in far above forecast, strengthening the dollar and pushing expectations of a Federal Reserve rate increase higher. The pair now faces the European Central Bank's rate decision on Thursday, where a hike is already priced in and the post-meeting guidance will set the euro's next direction.
EUR/USD trades near 1.1627 on Tuesday after a US jobs report beat forecasts by nearly three times. The data supported the dollar and lifted bets on tighter Fed policy. Attention now turns to the ECB meeting on 10 September, where the rate increase is already fully priced in.
US jobs data puts the dollar back on the front foot
Nonfarm payrolls rose by 162,000 in August against a forecast of around 56,000, the strongest month since March. The unemployment rate held at 4.1%, and average hourly earnings rose 3.1% year-on-year. The Bureau of Labor Statistics also revised June and July higher by a combined 55,000, turning July's previously reported job loss into a gain.
A labour market this resilient takes pressure off the Fed to support growth, leaving inflation as its main concern. After the release, money markets raised the probability of a September rate increase to around 58%, up from roughly 52% before the data. Higher expected US interest rates make dollar deposits more attractive, so the dollar gained ground and EUR/USD settled into a narrow range.
Why the ECB meeting matters more than the decision itself
All 65 economists polled by Reuters expect a 25-basis-point increase in the deposit rate to 2.50%. Money markets price the same outcome with near-full certainty and expect the deposit rate to reach around 3.00% by June 2027, implying two more increases after this week. When an outcome is fully priced in, the decision itself rarely moves markets, so the euro will take its cue from the press conference instead.
Eurozone inflation accelerated to 3.3% in August, driven largely by energy costs, and Christine Lagarde has already identified the energy shock as an upside risk to prices. If she confirms that further tightening remains under discussion, the euro could gain support and EUR/USD could test 1.1655, the upper edge of its current range. If she keeps every option open without committing to a path, the rate outlook stays in the dollar's favour and the pair could move towards 1.1525.
German factory orders add a second layer
New orders in German manufacturing rose 2.5% in July after an upwardly revised 3.7% increase in June, the third consecutive monthly increase against a forecast of just 0.3%. Excluding large-scale contracts, however, orders fell 1.4% from June, with domestic orders up 9.1% and foreign orders down 2.1%. Most of the headline strength came from shipbuilding, rail and aircraft contracts, so German industry's recovery still leans on a small number of large deals and on demand from within Europe.
On the technical picture, EUR/USD is consolidating around 1.1620 on the four-hour chart, with the MACD signal line above zero and pointing upward. While the pair holds above that level, the move toward 1.1655 remains the working scenario, with 1.1525 the level to watch further out should it fail to hold.
Source: ActionForex
Trading involves risk.
Risk Disclaimer
