The euro-dollar currency pair traded around 1.1560 on Friday, with EURUSD down 0.40% on the last day of the week after briefly rebounding toward 1.1590 following the release of the latest US labour market data.
The non-farm payrolls (NFP) report published by the US Bureau of Labor Statistics showed that employment declined by 92,000 jobs in February, sharply missing expectations for an increase of 59,000.
The previous month’s figure was also revised slightly lower to 126,000. At the same time, the unemployment rate rose to 4.4% from 4.3%, while the Labor Force Participation Rate edged down to 62%. However, wage dynamics remained relatively firm, with average hourly earnings increasing by 0.4% MoM and 3.8% YoY.
This combination of deteriorating job creation and still-elevated wage growth complicates the outlook for the Federal Reserve. A weaker labour market would normally reinforce expectations of monetary easing, but resilient wage pressures may limit the central bank’s room for aggressive rate cuts in the near term.
At the same time, US retail sales also highlighted signs of a cooling economy, declining by 0.2% MoM in January. Although the contraction was smaller than expected, the data confirmed a slowdown in consumer momentum, reinforcing concerns about the resilience of domestic demand.
“It is a dark day for risk assets, and the fundamentals aren’t going to help – particularly with a miss in Retail Sales rubbing salt in the wound, it seems that prior bounces in US data could have been a seasonal effect of Holidays/New Year hiring and consumption. We could now be facing a hangover,” said MarketPulse analyst Elior Manier.
“Such a reversal in the data can’t fail to raise questions about actual job displacement from new AI technologies and whether the Federal Reserve is really getting behind the curve.
“The issue for the Central Bank is that inflation is certainly bouncing higher despite lower Retail Sales – so combine a weaker jobs Market, consumption, and elevated inflation, and conclusions about stagflation could be reached quickly – and with decent reasoning, too.”
Meanwhile, the US dollar is finding renewed support from safe-haven flows as geopolitical tensions continue to fuel global risk aversion.
In a post published on Truth Social, President Donald Trump stated that there would be “no deal with Iran except unconditional surrender,” adding that the US and its allies would later help select a new leadership to rebuild the country. These remarks reinforced geopolitical tensions in the Middle East, prompting investors to seek safe-haven assets and supporting a rebound in the USD.
The DXY Dollar Index, which tracks the greenback against a basket of six major currencies, traded 0.30% higher on Friday, near 99.30, and remained close to its recent three-month high, reflecting persistent demand for the US currency despite disappointing employment figures.
In the Eurozone, economic momentum remains modest.
The latest figures showed that gross domestic product (GDP) expanded by 0.2% QoQ in the fourth quarter, slightly below earlier estimates. On an annual basis, growth came in at 1.2%, reflecting the region’s fragile recovery amid ongoing trade tensions and external uncertainties.
(Source: OANDA)
