At the outset of Friday's US trading session, crucial employment figures were released. The August Non-Farm Payrolls proved to be quite ambiguous. This release has added another layer of complexity to an already intricate fundamental puzzle, which has been forming recently concerning the EUR/USD pair. Price fluctuations reflect the traders' uncertainty: while buyers struggle to secure within the 9-figure range (despite their efforts), sellers can't settle below the 1.0800 target (though they've been trying).
The eighth figure has become a "compromise territory" to which both bulls and bears of EUR/USD return. Given its ambiguity, today's report didn't tip the balance either way. Despite the high intraday volatility, traders remain at a standstill after a six-week powerful bearish marathon. The pair has declined by more than 500 points since mid-July, but the future downward trend prospects remain uncertain given the mixed fundamental picture.
So, according to the released data, the US unemployment rate in August increased to 3.8%, while most experts expected it to be at 3.5%. This indicator had declined for the past two months, but it unexpectedly entered the "red zone" in August, reaching its highest since February 2022.
Employment in the non-agricultural sector increased by 187,000 last month. This report component was in the "green zone" (analysts had forecasted an increase of 169,000). Still, there's a catch: the indicator has fallen short of the 200,000 mark for the third consecutive month (July's figure was revised downward to 157,000), indicating some concerning trends. In the private sector, employment increased by 179,000 against a forecasted rise of 150,000. Public sector employment grew by just 8,000.
The report's structure indicates an increase in employment in the social security sector (by 26,000), in healthcare (by 71,000), in construction (by 22,000), and in the leisure and recreation sector (by 40,000). At the same time, the transport sector recorded a negative dynamic (-34,000 jobs), primarily due to the bankruptcy of Yellow Corp (one of the largest US freight companies with a workforce of about 30,000 employees).
The inflationary component of the Non-Farm Payrolls (NFP) data entered the "red zone": the average hourly wage increased by 4.3% annually. For the four preceding months, the figure stood at 4.4% y/y, and it was also expected to be at this level in August.
As we see, today's report is not a "disaster" for the US dollar. However, it's hard to call it a boon for the dollar, especially considering the unexpected increase in US unemployment. Unsurprisingly, the market responded to the report accordingly: initially, the EUR/USD pair jumped towards the 9.0000 range, but the upward momentum faded quickly, allowing sellers to take control.
Overall, at the moment, there isn't sufficient justification for the development of a stable (this is the keyword) upward or downward trend. By and large, the only thing in the dollar's favor this week was the core PCE index, which increased to 4.2%. However, this figure matched forecasts and did not surprise market participants. The number of unemployment claims has also decreased for the third consecutive week.
But all other macroeconomic reports disappointed dollar bulls. For instance, the US Consumer Confidence Index dropped to 106 points (with a forecasted increase to 116 points) – the weakest result since May this year. The Manufacturing Activity Index for August dropped to 47 points (with an expected increase to 48 points). US GDP growth for the second quarter was 2.1% (according to the second estimate), while the initial estimate was 2.4%. The ISM Manufacturing Index remained below the 50-point mark, though it did rise to 47.6 points. The increase in US unemployment for August only added to this picture.
However, despite the US currency's problems, the euro isn't ready to "take up the slack." Disappointing PMI and IFO indices, published last week, undermined the single currency's position. Representatives of the European Central Bank (especially Isabel Schnabel) once again expressed concerns about the economic growth prospects of the Eurozone, which subsequently decreased the probability of an ECB rate hike in September to around 35%. The minutes of the ECB's July meeting added fuel to the fire. According to the document, ECB members agreed with the conclusions of the bank's chief economist that the economic outlook for the Eurozone has "significantly worsened." In these circumstances, even the inflation report didn't help the single currency, with the overall CPI remaining at the July level (5.3%) and the core index dropping to 5.3%.
Thus, the prevailing fundamental backdrop does not support the development of either a downward or upward trend. In the medium term, the EUR/USD pair will likely continue to trade around the 8.0000 range, so any rapid upward/downward movements should be cautiously approached.
