EURUSD is down nearly 0.6% today, slipping below 1.115 after another set of strong US macroeconomic data, with both the NFP report and University of Michigan consumer sentiment figures beating expectations and supporting higher US Treasury yields. At the same time, September retail sales data from the euro area surprised to the downside, falling 0.7% month over month versus a 0.1% decline expected and a 0.1% increase previously. On an annual basis, sales rose by just 0.4%, below the 0.6% consensus and 0.8% recorded previously.

  • The October NFP report pointed to significantly greater resilience in the US labor market than expected. Employment increased by 165,000 versus a consensus forecast of just 65,000, more than 2.5 times the expected gain, with the private sector accounting for almost the entire increase at 159,000 jobs, strengthening the positive message from the report.

  • Particularly important was the decline in the unemployment rate to 4.1%, accompanied by an increase in labor-force participation to 61.9%. This suggests a genuine improvement in labor demand rather than a purely statistical effect caused by a shrinking labor supply. The report significantly weakens the case for rapid Fed easing, supporting both the US dollar and Treasury yields.

  • The University of Michigan Consumer Sentiment Index rose to 51.0 in November from 48.0 previously, compared with expectations of 48.0. Consumer expectations improved to 50.9 from 48.8, clearly above the 49.0 consensus, while the Current Conditions Index increased to 51.0 from 46.7 versus the 47.0 forecast. One-year inflation expectations declined to 4.3% from 4.7%, below the expected 4.6%, although they remain elevated. Five-year inflation expectations eased to 3.4% from 3.5% previously, still well above the Fed’s 2% inflation target.

The October NFP report pointed to significantly greater resilience in the US labor market than expected. Employment increased by 165,000 versus a consensus forecast of just 65,000, more than 2.5 times the expected gain, with the private sector accounting for almost the entire increase at 159,000 jobs, strengthening the positive message from the report.

Particularly important was the decline in the unemployment rate to 4.1%, accompanied by an increase in labor-force participation to 61.9%. This suggests a genuine improvement in labor demand rather than a purely statistical effect caused by a shrinking labor supply. The report significantly weakens the case for rapid Fed easing, supporting both the US dollar and Treasury yields.

The University of Michigan Consumer Sentiment Index rose to 51.0 in November from 48.0 previously, compared with expectations of 48.0. Consumer expectations improved to 50.9 from 48.8, clearly above the 49.0 consensus, while the Current Conditions Index increased to 51.0 from 46.7 versus the 47.0 forecast. One-year inflation expectations declined to 4.3% from 4.7%, below the expected 4.6%, although they remain elevated. Five-year inflation expectations eased to 3.4% from 3.5% previously, still well above the Fed’s 2% inflation target.

EURUSD chart (D1 timeframe)

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