The EUR/USD pair softens to around 1.1290 during the early Asian session on Friday. The US Dollar (USD) edges higher against the Euro (EUR) amid optimism about a de-escalation in the global trade conflict. All eyes will be on the US April Nonfarm Payrolls (NFP) report, which is due later on Friday.
A social media account affiliated with Chinese state media said on Thursday the United States (USA) has reached out toChina to begin negotiations regarding US President Donald Trump’s 145% tariffs. US officials, including Treasury Secretary Scott Bessent and White House economic adviser Kevin Hassett, also expressed hope for progress in easing trade tensions. This, in turn, provides some support to the Greenback and creates a headwind for the major pair.
US data released on Thursday were mixed. The US weekly Initial Jobless Claims for the week ended April 26 rose by 241,000, compared to the previous week’s 223,000 (revised from 222,000), according to the US Department of Labor.This figure came in above the market consensus of 224,000. Meanwhile, the ISM Manufacturing Purchasing Managers’ Index (PMI) declined to 48.7 in April from 49.0 in March, beating the market expectation of 48.
On the Euro front, traders have almost priced in a 25 basis points (bps) rate cut by the European Central Bank (ECB) in the June policy meeting. ECB officials have forecasted a further slowdown in inflation and economic growth in response to tariffs imposed by the US on its trade partners. The rising bets of further ECB rate cuts might weigh on the shared currency in the near term.
The US NFP report will take center stage later on Friday. The US is expected to have added 130K new job positions in April, while the Unemployment Rate is estimated to stay at 4.2%, unchanged from March. In the case of a softer-than-expected reading, this could undermine the USD against the EUR.
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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The US Dollar surged on Thursday, backed by de-escalating trade tensions. AUD/USD lost the 0.6400 mark and comfortably trades near the lower end of its latest range. Australian Q1 PPI and Retail Sales coming up next.
The EUR/USD pair softens to around 1.1290 during the early Asian session on Friday. The US Dollar edges higher against the Euro amid optimism about a de-escalation in the global trade conflict. All eyes will be on the US April Nonfarm Payrolls report, which is due later on Friday.
XAU/USD traded as low as $3,201.88 as investors stayed away from the safe-haven metal. The US Dollar benefited from fresh hopes on tariffs deals. Mixed US data failed to impress investors ahead of the NFP report.
Morgan Stanley is allegedly seeking to begin offering crypto trading on its E*Trade platform, according to a report from Bloomberg. The report stated that the launch may involve partnerships with established crypto firms to support trading assets like Bitcoin and Ether.
We expect the FOMC will leave its target range for the federal funds rate unchanged at 4.25-4.50% at its upcoming meeting on May 6-7, a view widely shared by financial markets and economists. Market pricing currently implies only a 9% probability of the FOMC cutting the fed funds rate by 25 bps.
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