Euro Strengthens, Yen Consolidates Ahead of Nonfarm Payrolls Report

The major currency pairs, EUR/USD and USD/JPY, are showing restrained movement as markets await the release of key US employment data. Investors remain cautious, assessing the outlook for monetary policy in light of recent central bank decisions.

Today, market participants will focus on the release of the monthly US Nonfarm Payrolls (NFP) report. According to the consensus forecast, employment is expected to increase by 127K jobs in May, down from 177K in April and below the 12-month average of 156,800. The unemployment rate is projected to remain steady at 4.2%, consistent with recent months.

The anticipated slowdown in job growth is likely tied to ongoing economic uncertainty driven by trade tensions and the imposition of new tariffs. Weak ADP employment data, which showed a gain of only 37K jobs in May, has further raised concerns about the labour market. If the NFP data comes in below expectations, it may reinforce forecasts of potential interest rate cuts by the Federal Reserve in the coming months.

EUR/USD

Yesterday, the European Central Bank (ECB) cut its interest rate by 25 basis points to 2.15%. This marks the eighth rate reduction since May 2024, driven by a slowdown in eurozone inflation to 1.9%, below the ECB’s 2% target. ECB President Christine Lagarde noted that the bank is in a “strong position” to navigate the current global economic uncertainty, including trade tensions with the United States. This contributed to the strengthening of the EUR/USD pair to the 1.1490 level. Technical analysis of EUR/USD suggests a potential retest of the April high around 1.1570.

Key events that may impact EUR/USD pricing today include:

• 09:00 (GMT+3): Germany Industrial Production
• 11:30 (GMT+3): Speech by ECB President Christine Lagarde
• 12:00 (GMT+3): Eurozone GDP
• 12:00 (GMT+3): Eurozone Retail Sales for April

USD/JPY

USD/JPY is trading around 143.80, showing signs of consolidation after a recent decline. Yields on 30-year Japanese government bonds have dropped to 2.88%, and 10-year yields to 1.46%, reflecting rising bond prices. The decline in yields is linked to expectations of reduced issuance of ultra-long bonds by Japan’s Ministry of Finance following weak demand at recent auctions. This has strengthened the yen and weighed on the USD/JPY pair.

Nevertheless, buyers are managing to hold the price above the 142.50 support level, which could support a renewed upward move.

Key events that may influence USD/JPY pricing today:

• 15:30 (GMT+3): US Average Hourly Earnings
• 15:30 (GMT+3): US Nonfarm Payrolls
• 15:30 (GMT+3): US Unemployment Rate

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