EURUSD rebounds 0.8% 🚨

Markets reacted sharply to significantly weaker U.S. non-farm payroll (NFP) data. Job growth came in at just 73K, well below the forecast of 110K, while the June figure was massively revised down from 147K to just 14K. The unemployment rate rose to 4.2%, in line with expectations, and wage growth held steady at 3.8% y/y and 0.3% m/m—both close to forecasts. In response, the U.S. dollar weakened sharply, reflecting rising market expectations for a swift interest-rate cut by the Federal Reserve.

Futures now price in a 75% chance of a 25 bp rate cut in September, up from 45% before the report. Despite earlier cautious comments by Jerome Powell, the evident labour-market slowdown significantly increases the likelihood of faster monetary-policy easing. It also reinforces a trend of declining inflation expectations and growing risk of further economic slowdown. Market sentiment clearly shows that investors are focusing more heavily on hard data, which is increasingly shaping the Fed's decision-making process.

The unemployment rate remains at 4.2%, but the drop in non-farm job creation clearly signals a slowdown in labour-market momentum. Interestingly, however, wages continue to rise, maintaining some inflationary pressure in the economy. Source: xStation

Traders are once again pricing in nearly two full rate cuts from the Federal Reserve by the end of 2025.
Source: Bloomberg Financial LP

EURUSD H1 chart

Weak July NFP data—especially the major downward revision for June—has effectively erased the entire post-Fed downward move in EURUSD seen on Wednesday. Powell had clearly stated in his press conference that renewed rate cuts would be driven by weak labour-market data or significantly lower CPI readings. One of those two conditions materialised in the same week. In this context, the next set of data before the Fed's next decision will be critical.

Source: xStation