EUR/USD: Dollar steady, awaiting jobs data and Powell’s stance.
Press Hub UCapital
Share:
A wave of underwhelming U.S. economic data has begun to unsettle policymakers and traders alike. Treasury Secretary Scott Bessent, who once vowed not to interfere in the Federal Reserve’s decisions, has already started offering monetary policy guidance by May. The trigger is clear: the bond market is flashing recession signals, and the labor market may soon follow. These developments are testing the dollar’s resilience, just as markets await the April non-farm payrolls report and the May 6–7 FOMC meeting.
Despite an economy that appears to be cooling across multiple fronts, the U.S. dollar remains underpinned by robust equity markets and lingering risk aversion. Recent data shows manufacturing activity at a five-month low and jobless claims trending higher. Yet EUR/USD bears continue to take their cue more from geopolitical developments—such as China’s willingness to resume trade talks—than from macro deterioration at home. The divergence between hard data and market behavior is growing, and questions are now being raised about whether the Fed will remain unmoved by both political pressure and bond market signals.
The bond market’s message is unambiguous. Two-year Treasury yields remain below the Fed’s benchmark rate, a historically reliable signal of policy misalignment. While Bessent’s call for monetary expansion deviates from his earlier stance, it mirrors investor expectations for at least three rate cuts by year-end. Still, Jerome Powell and the FOMC are unlikely to shift policy on May 7. The Fed has shown a consistent reluctance to preemptively adjust rates unless the labor market materially weakens. Therefore, all attention is shifting to employment data, particularly Friday’s non-farm payrolls report.
April’s numbers will be the first to reflect potential fallout from the White House’s recent tariff campaign. Market expectations are subdued, with some analysts warning that the report may reveal weakness in both government hiring and broader labor participation. A significant miss could intensify rate cut bets, while a surprise to the upside might buy the Fed more time. Either outcome is likely to fuel volatility across dollar pairs, with EUR/USD at the center.
From a trading perspective, the euro has room to appreciate if equity markets finally react to the softening macro landscape. The S&P 500’s extended rally has supported the greenback indirectly, masking growing cracks in the economic foundation. Should risk sentiment shift and equities correct, EUR/USD may break higher. Longs initiated near the $1.1285 level remain valid, and further buying interest could emerge on any pullbacks toward this zone.
The short-term setup hinges on two factors: the labor market's ability to withstand current pressures and the Fed’s resolve to hold its ground in the face of both political interference and market expectations. For traders, the tactical focus should remain on employment data and Powell’s post-FOMC messaging. A disappointing jobs print, combined with cautious Fed language, may offer the catalyst for the next leg higher in EUR/USD.
Despite an economy that appears to be cooling across multiple fronts, the U.S. dollar remains underpinned by robust equity markets and lingering risk aversion. Recent data shows manufacturing activity at a five-month low and jobless claims trending higher. Yet EUR/USD bears continue to take their cue more from geopolitical developments—such as China’s willingness to resume trade talks—than from macro deterioration at home. The divergence between hard data and market behavior is growing, and questions are now being raised about whether the Fed will remain unmoved by both political pressure and bond market signals.
The bond market’s message is unambiguous. Two-year Treasury yields remain below the Fed’s benchmark rate, a historically reliable signal of policy misalignment. While Bessent’s call for monetary expansion deviates from his earlier stance, it mirrors investor expectations for at least three rate cuts by year-end. Still, Jerome Powell and the FOMC are unlikely to shift policy on May 7. The Fed has shown a consistent reluctance to preemptively adjust rates unless the labor market materially weakens. Therefore, all attention is shifting to employment data, particularly Friday’s non-farm payrolls report.
April’s numbers will be the first to reflect potential fallout from the White House’s recent tariff campaign. Market expectations are subdued, with some analysts warning that the report may reveal weakness in both government hiring and broader labor participation. A significant miss could intensify rate cut bets, while a surprise to the upside might buy the Fed more time. Either outcome is likely to fuel volatility across dollar pairs, with EUR/USD at the center.
From a trading perspective, the euro has room to appreciate if equity markets finally react to the softening macro landscape. The S&P 500’s extended rally has supported the greenback indirectly, masking growing cracks in the economic foundation. Should risk sentiment shift and equities correct, EUR/USD may break higher. Longs initiated near the $1.1285 level remain valid, and further buying interest could emerge on any pullbacks toward this zone.
The short-term setup hinges on two factors: the labor market's ability to withstand current pressures and the Fed’s resolve to hold its ground in the face of both political interference and market expectations. For traders, the tactical focus should remain on employment data and Powell’s post-FOMC messaging. A disappointing jobs print, combined with cautious Fed language, may offer the catalyst for the next leg higher in EUR/USD.