EUR/USD dips after US payrolls misses estimate

The euro has edged lower on Friday. EUR/USD is trading at 1.1088 in the North American session at the time of writing, down 0.20%.

US nonfarm payrolls improves but misses estimate

Today’s US nonfarm payrolls wasn’t a disaster but certainly nothing to smile about. The economy created 142 thousand new jobs in August, better than the July gain of 114 thousand but short of the market estimate of 160 thousand. The unemployment rate ticked lower to 4.2%, in line with expectations and a shade below the market estimate of 4.3%.

The US dollar hasn’t shown much reaction to the employment report. However, expectations for an oversize 50-basis point cut from the Federal Reserve in September have shot up to 59%, up from 43% prior to the nonfarm payrolls release, according to CME’s FedWatch.

Had nonfarm payrolls beaten expectations, it likely would have cemented a 25-bps cut. The soft reading means that the Fed meeting is live, with investors unsure about the size of the expected rate cut. The US will release CPI and retail sales before the Fed meeting and any surprises from these releases could impact on the rate decision.

German industrial production slides

Germany’s economy continues to flounder, which doesn’t bode well for the eurozone economy. German industrial production, released today, declined 2.4% m/m in July, down from a 1.7% gain in June and shy of the market estimate of -0.3%. Manufacturing declined across the board and the automotive sector was especially weak. Yearly, industrial output declined by 5.3% in July, compared to a 3.7% decline in June.

The European Central Bank meets on Sept. 12 and is widely expected to trim rates after an initial cut in July. Inflation has been tamed and is close to the 2% target and the eurozone economy is struggling. The ECB wants to avoid a recession and a rate cut would provide a boost to the economy and provide relief for consumers.

EUR/USD Technical

• EUR/USD is testing support at 1.1082. Below, there is support at 1.1044
• There is resistance at 1.1119 and 1.1157

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