Forex review: US statistics may change the euro's dynamics
On Friday, November 6, the attention of FOREX currency market participants will be primarily focused on economic statistics from the US. The published data may significantly affect expectations regarding the further policy of the Federal Reserve and, accordingly, determine the short-term dynamics of the EUR/USD pair.
For the euro, it is now especially important how convincing the US economic indicators turn out to be. Strong statistics can support the dollar and increase pressure on the European currency. Conversely, signs of a slowdown in the US economy could trigger a weakening of the US dollar and a new wave of euro buying.
Which indicators should be watched on November 6
Among the most important publications today:
- The US employment report (Nonfarm Payrolls, NFP) for October. This is the main event of the day. Non-farm payrolls are forecast to increase by 65,000 after a rise of 29,000 in the previous month.
- The US unemployment rate. It is expected to remain at 4.2%. If it rises, it may indicate a cooling of the American labour market.
- Average hourly earnings. Faster wage growth could fuel inflation concerns and influence expectations for Fed interest rates.
- The University of Michigan consumer sentiment index for November. The preliminary estimate is expected at 48.5 points versus 48 points earlier. This indicator is important for assessing confidence of American consumers and prospects for domestic demand.
The labour market report is expected at 8:30 New York time (15:30 Kyiv time), and the preliminary University of Michigan index at 10:00 (17:00 Kyiv time).
How statistics may affect the euro
There are two main possible scenarios for the EUR/USD pair.
Scenario one: dollar strengthens, euro cheapens.
If the American economy shows a higher pace of job creation, unemployment remains low, and wages continue to grow rapidly, this will argue in favour of maintaining a relatively tight monetary policy by the Fed.
In that case, investors may revise expectations for future cuts in US interest rates. The yield on American assets will gain additional support, and the dollar may strengthen against the euro.
Scenario two: the euro gets an opportunity for growth.
If the number of new jobs comes in significantly below the forecast 65,000, unemployment rises, and wage growth slows, the market may perceive this as evidence of a weakening US economy.
Then expectations of a softer Fed policy will intensify, which could trigger dollar selling and a recovery in EUR/USD. An additional positive factor for the euro could be an improvement in US consumer sentiment if it turns out to be less significant than negative signals from the labour market, or, on the contrary, a deterioration in sentiment would add to pressure on the dollar.
What to expect from EUR/USD
Thus, Friday could turn out to be a fairly important day for the euro on FOREX. The main guide will be the American employment report, with investors assessing not only the number of jobs created but also unemployment along with wage dynamics.
Of particular importance is consistency among the indicators: weak employment alongside accelerating wages may give the market a contradictory signal.
For now, market participants should keep in mind that the euro's reaction will depend not only on the figures themselves but also on how much they diverge from analysts' forecasts. In a climate of high sensitivity of the currency market to expectations regarding Fed policy, even slight deviations of statistics from forecasts can cause noticeable fluctuations in EUR/USD.
