FX.co ★ Markets await US non-farm report

Strong buying pressure was observed in EUR / USD on Thursday, but it was not enough to reverse the downward trend. In fact, all that the bulls managed to do was to keep the pair in the side channel.

But today, there may be strong movements in the market, which will depend on the latest data on US non-farm payrolls. If the indicator shows better-than-expected figures, demand for dollar will rise, which will accordingly lead to a deeper decline in EUR / USD.

In their forecasts, analysts said jobs in the non-farm sector will increase by 711,000, which, if happens, will be the strongest record since March 2021. However, the data should be treated with caution, as the actual figures last April and May were much lower than the forecasts.

Nonetheless, so far, about 14.7 million jobs have been restored, but this figure is still 7.5 million less than before the coronavirus crisis. Obviously, the labor market has a long way to go before it can reach a full recovery, which means that the Federal Reserve will continue to pursue a super-soft monetary policy.

And in his recent speech, Fed Chairman Jerome Powell said recovery in employment will slow, as many citizens will delay their return to work because of the ongoing federal programs. Many states have more attractive unemployment benefits than minimum wages, so citizens prefer getting them than finding jobs. But many state officials announced that they plan to end support programs sooner than scheduled, in order to jumpstart people to look for work.

As of June 26, jobless claims in the US have reduced 364,000, which is significantly lower than the record a week ago.

Along with jobless claims, data on the US manufacturing sector was also released on Thursday, and it showed that activity in June was lesser than last month. ISM said manufacturing PMI fell to 60.6 points, which is lower than the figure in May. The decline partially reflects the slowdown in new orders, which fell to 66.0 points.

Construction costs also decreased, by approximately 0.3% to $ 1.545 trillion a year. This surprised many analysts because they expected to see a 0.4% increase in the index. Most likely, the indicator slipped because there was a sharp decline in private construction costs.

Going back to EUR / USD, a lot depends on 1.1840 today because falling below it will result in a further drop to the bottom of the 18th figure, and then to 1.1760. Meanwhile, going above 1.1840 will lead to a jump to 1.1880, and then to 1.1930 and 1.1975.

As mentioned above, there was a buying pressure in EUR / USD, and the cause of it was the strong economic data from Germany. Destasis reported that retail sales in the country rebounded in May, thanks to the easing of some quarantine restrictions related to the coronavirus pandemic. The index rose 4.2% month-over-month, but decreased 2.4% year-on-year.

Better-than-expected data on EU manufacturing also supported euro, as the index posted a slight gain to 63.4 points.

The unemployment rate also fell to 7.9%, after a 306,000 decrease in jobless people was recorded in May.

GBP

Pound slipped after Bank of England Governor Andrew Bailey suddenly downplayed the sharp surge in inflation. In his recent speech, Bailey said policymakers should not overreact and call for an early tightening of monetary policy, as doing such could undermine economic recovery. This is a complete turn around to his stance a month ago, when he was speaking about the risks of inflationary pressure. Bailey said inflation will exceed 3% this year, but will return to 2% in 2022.

Increasing COVID-19 cases caused by the delta variant is also delaying the prospect of a policy change.

With regards to other macro statistics, the IHS Markit said manufacturing PMI fell to 63.9 points in June, from a May high of 65.6 points.