Anna 
The EUR/USD pair dipped below the 1.0800 level on Friday following the release of robust US Nonfarm Payrolls (NFP) data, which surpassed expectations. The data revealed that the US economy added 303,000 new jobs in March, exceeding economists’ forecasts of 200,000. Additionally, the Unemployment Rate dropped to 3.8% from the previous 3.9%, contrary to economists’ expectations of no change.
The better-than-expected US jobs report suggests continued strength in the US economy, indicating that inflation is likely to remain elevated. Consequently, the likelihood of the Federal Reserve (Fed) cutting interest rates in June, as previously anticipated, has diminished.
Another significant aspect of the report, Average Hourly Earnings data, remained unchanged, with a year-over-year increase of 4.1% and a month-over-month rise of 0.3%, according to data from the Bureau of Labor Statistics.
EUR/USD: Retreats Amid Inflationary Concerns
Prior to the NFP release, EUR/USD had already edged lower due to disappointing German Industrial Orders data, which exhibited a steep decline of 10.6% year-on-year in February. Although German Factory Order data showed a slight increase of 0.2%, it missed economists’ estimates, contributing to the euro’s decline.
Moreover, escalating tensions in the Middle East have propelled the price of oil above $90 per barrel, potentially leading to broader inflationary pressures. This reinforces the stance of policymakers advocating for higher interest rates.
Minneapolis Federal Reserve Bank President Neel Kashkari’s remarks cast doubt on the possibility of interest rate cuts in 2024 if inflation persists at current levels. This stance supports the maintenance of elevated interest rates, which attracts foreign capital inflows and bolsters the US Dollar.
In contrast, there is growing consensus among Eurozone rate-setters regarding a proposed interest rate cut in June, further weighing on the Euro. However, the decision hinges on forthcoming wage data, particularly whether it shows a decline in wage inflation ahead of the June meeting.
