Euro Pauses After Strong Week
Kenny Fisher | May 10, 2021 12:47PM ET
The euro is coming off a strong week, with gains of 1.19%. EUR/USD soared on Friday, with gains of 0.81%, buoyed by the poor performance for U.S. nonfarm payrolls.
On the fundamental front, Germany releases ZEW Economic Sentiment on Tuesday (9:00 GMT). The indicator slowed to 70.6 in April, down from 76.6 beforehand. Analysts expect a rebound in May, with a consensus of 72.0. The euro-zone indicator is also expected to improve to 68.0, up from the current level of 66.3 points.
U.S. Nonfarm Payrolls Miss Forecast
The April nonfarm payroll report was expected to be a blowout. There were expectations that NFP would break above the 1-million mark, and some analysts even projected a reading above the 2-million mark. At the end of the day, however, the economy created just 266,000 jobs, a massive miss of the forecast of 990,000. The unemployment rate rose to 6.1%, up from 5.8% and above the forecast of 6.0%.
Still, the news was not all bad, as wage growth rebounded with a strong gain of 0.7%, after a read of -0.1% beforehand. The U.S. economy remains in good shape, and investors are unlikely to let a weak NFP report ruin optimism over the economy.
The Fed has maintained a dovish monetary stance, even with the U.S. economy posting strong numbers. The disappointing nonfarm payroll report appears to have justified the Fed’s position, but investors will be keeping a close eye on the April inflation data, which will be released on Wednesday. A sharp rise in inflation could renew calls for the Fed to consider tapering. On the other hand, if the upcoming inflation numbers miss expectations, there will be less pressure on the Fed to change its accommodative policy.
EUR/USD Technical
- EUR/USD faces resistance at 1.2227 and 1.2292.
- On the downside, there is support at 1.2042 and 1.1922.
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