EUR/USD Stages Modest Rebound Amid Mixed Data and Improved Risk Sentiment

After a series of negative performances earlier in the week, EUR/USD managed to make a modest recovery late on Thursday. As of early Friday, the pair is trading within a narrow range around 1.0950.

The rebound in EUR/USD was driven by a combination of factors, including mixed macroeconomic data releases from the US and an improvement in risk sentiment. Late on Thursday, the US Dollar lost some of its strength, allowing the Euro to gain ground. Early Friday, the Euro Stoxx 50 index is up by 0.5%, and US stock index futures are trading in positive territory, which is further supporting the pair.

Investors are keenly awaiting the release of the US Nonfarm Payrolls (NFP) data for July, with a forecasted increase of 200,000 jobs following the 209,000 increase recorded in June. Additionally, annual wage inflation is expected to decrease slightly to 4.2%, while the Unemployment Rate is projected to remain unchanged at 3.6%.

Federal Reserve Chairman Jerome Powell has emphasized the central bank’s data-dependent approach to monetary policy in the aftermath of the July meeting.

Market expectations currently suggest a 30% probability of the Fed implementing one more 25 basis points rate hike before the year’s end. If the NFP print surpasses expectations and reaches or exceeds 250,000 jobs, it could fuel hawkish Fed expectations, giving a boost to the USD. Conversely, a weak NFP print around 150,000 jobs could have the opposite effect, dampening the USD’s value.

In the event that the NFP data aligns closely with market forecasts, investors are likely to shift their attention to wage inflation figures. Any unexpected increase in annual wage inflation may help the USD remain resilient against the Euro.