Recent US Nonfarm Payrolls (NFP) data came in stronger than expected, with NFP at 162,000 compared to the anticipated 55,000, which initially boosted the US Dollar (USD) and the US Dollar Index (DXY) [2][1]. However, softer wage growth and only modest repricing of Federal Reserve (Fed) rate hike expectations limited further gains for the USD [1]. Following the jobs data, market-implied odds of a September Fed hike rose to around 65% from 55% before easing back to 62% according to OCBC, while BNY strategists noted a move from 50% to 60% [1][2]. This underscores how closely rate expectations are tied to economic data releases [2].
The focus for the USD now shifts to the upcoming US Consumer Price Index (CPI) data, which is seen as a key catalyst for further market moves. OCBC's Christopher Wong notes that a CPI upside surprise could renew USD strength, while a softer print would likely keep price action two-way [1]. Technical analysis shows the DXY at 99.20, maintaining mild bullish momentum with resistance at 99.40 and 99.75, and support at 98.60/70 and 98.00 [1].
For the Euro (EUR), attention is on the European Central Bank’s (ECB) monetary policy announcement scheduled for Thursday. Deutsche Bank expects a 25 basis point rate increase, taking the deposit rate to 2.50%, and highlights that investors will be watching for any guidance on further tightening [2]. The EUR/USD pair is trading near 1.1625, holding above the 20-day Exponential Moving Average (EMA) at 1.1600, with a modest bullish tone and RSI around 56 [2]. Immediate support is at the 20-day EMA, with resistance at the August high of 1.1713 and the April high of 1.1849 [2].
Market activity is somewhat muted due to the extended US Labor Day weekend, but both the US CPI and ECB decisions are expected to be major triggers for currency moves this week [2].
CONCLUSION
Stronger-than-expected US payrolls have supported the US Dollar, but further gains are capped as markets await key inflation data and central bank decisions. The upcoming US CPI release and ECB policy announcement are likely to set the tone for both the USD and EUR in the near term, with investors closely monitoring for signals on future rate moves.