A volatile trading week wraps up with the release of the highly anticipated US Nonfarm Payrolls (NFP) data for July, scheduled for Friday at 12:30 GMT. Published by the Bureau of Labor Statistics (BLS), the report offers a monthly snapshot of employment trends, including job creation, wage growth, and the unemployment rate—key metrics used by the Federal Reserve (Fed) to shape monetary policy.
Although the Fed has already delivered its July policy decision—holding interest rates steady—the NFP release could still sway market sentiment. Economists forecast that the US economy added approximately 110,000 new jobs in July, down from the 147,000 recorded in June. Meanwhile, the unemployment rate is expected to edge up from 4.1% to 4.2%.
Wage growth is also in focus. Average Hourly Earnings are projected to rise 0.3% month-on-month and 3.8% year-on-year, slightly above June’s figures of 0.2% and 3.7%, respectively. These numbers hint at persistent wage inflation despite a cooling labor market.
Labor Market Indicators Send Mixed Signals
Recent labor data paints a mixed picture. According to the BLS Job Openings and Labor Turnover Survey (JOLTS), job openings fell to 7.43 million in June from 7.77 million in May, missing expectations of 7.55 million. However, the ADP Employment Report showed stronger-than-expected growth, with 104,000 private-sector jobs added in July and a revised 23,000-job loss in June (previously estimated at -33,000).
The Fed, meanwhile, left its benchmark interest rate unchanged in a target range of 4.25%–4.50% during its July meeting. Notably, two Fed governors—Christopher Waller and Michelle Bowman—dissented, voting in favor of a rate cut.
Fed Chair Jerome Powell maintained a hawkish tone, citing ongoing concerns about inflation remaining above the 2% target and a labor market that, while cooling, remains tight. Powell emphasized the Fed’s readiness to act if conditions warrant, but dismissed political pressure to cut rates, particularly from President Trump. He also highlighted the uncertain impact of tariffs on inflation.
As a result, the probability of a September rate cut dropped from nearly 60% to around 43%, according to the CME FedWatch Tool.
Economic Growth Accelerates in Q2
Adding to the mixed signals, the flash estimate for Q2 GDP revealed the US economy expanded at an annualized rate of 3%, far exceeding both the expected 2.4% and the previous quarter’s 0.5% decline.
Impact on EUR/USD and the US Dollar Outlook
Trade developments have played a significant role in the USD’s strength this week. Positive momentum began with reports of trade agreements between the US and the EU, as well as Japan. Negotiations with China also continue. However, uncertainty persists around potential deals with Canada, Australia, and India, and President Trump recently announced a 50% tariff on Brazilian imports, along with universal 50% tariffs on copper products, effective August 1.
As a result, the US Dollar (USD) remains firm, with EUR/USD hovering around 1.1400. A stronger-than-expected NFP report could reinforce the Fed’s current stance and drive the USD higher. Conversely, a weaker jobs report coupled with a rising unemployment rate could weigh on the Greenback.
A moderately positive report—showing decent job growth with a slight uptick in unemployment—may have a limited short-term effect but still support the USD in the broader context.
Market Outlook: EUR/USD Under Pressure
Valeria Bednarik, Chief Analyst at FXStreet, notes that EUR/USD has lost nearly 400 pips from its July peak of 1.1830. “The USD rally was a long-overdue correction after five months of losses. A strong NFP report could see EUR/USD break below the 1.1400 mark and fall toward 1.1340, or even 1.1280.”
She adds, “For EUR/USD to shift momentum, it must reclaim the 1.1470 level. A weekly close near 1.1550 would offer signs of stabilization, but downside risks remain dominant in the medium term.”
