EUR/USD breaks below 1.16 after US adds 172,000 jobs in May

EUR/USD fell below key support Friday after the U.S. added 172,000 jobs in May, nearly double the roughly 85,000 consensus forecast.usatoday
The pair had been range-bound near 1.16 on expectations of an ECB rate hike June 11, but the payrolls beat reinforced dollar strength, according to MUFG.mufgresearch
Analysts at Brown Brothers Harriman project EUR/USD could bottom near 1.1400 if U.S. growth outperformance persists, with the ECB decision the next major catalyst.bbh

EUR/USD Drops Below 1.16 After Strong US Jobs Data

The EUR/USD pair slid below 1.16 on Friday after a stronger-than-expected U.S. jobs report bolstered the dollar, reversing modest gains the euro had built on hawkish European Central Bank expectations ahead of the data release.

Payrolls Surprise Fuels Dollar Strength

The U.S. economy added 172,000 jobs in May, roughly double the consensus forecast of around 85,000–90,000, the Bureau of Labor Statistics reported Friday. The unemployment rate held steady at 4.3 percent, while average hourly earnings rose 0.3 percent month-over-month. The report marked the third consecutive month of job gains and pushed the three-month average to 188,000.tradingeconomics

Prior to the release, EUR/USD had been trading in a tight 1.16–1.1650 range, according to Convera’s pre-NFP analysis. The pair had been underpinned by near-certain market pricing for a rate hike from the ECB at its June 11 meeting. However, as MUFG’s Derek Halpenny noted in a morning briefing, “EUR/USD is now more vulnerable to a stronger employment print given the OIS curve in Europe is now well priced or even overpriced for what the ECB will deliver”.mufgresearch

ECB Expectations Meet Dollar Reality

The ECB kept its deposit rate at 2.00 percent at its April 30 meeting but signaled a hike was likely at the June 11 gathering, with eurozone inflation running at 3 percent — well above its 2 percent target. Reuters reported in May that the case for a June hike was “nearly sealed,” citing four sources familiar with deliberations.reuters

Yet the strong U.S. labor data shifted rate differentials back in the dollar’s favor. MUFG had warned before the release that “a consensus print today will be enough to keep the US dollar well supported,” adding that “appetite for US dollar selling on a weak report is probably less than appetite for buying on a stronger report”.mufgresearch

Technical Outlook

Forex.com flagged the pair as breaking below a key support zone in the wake of the NFP data. Analysts at Brown Brothers Harriman had projected EUR/USD could carve out a bottom around 1.1400 should U.S. growth outperformance reassert itself. The next major catalyst for the pair will be the ECB’s rate decision on June 11, where a 25-basis-point hike to 2.25 percent is widely expected.lemonde