The United States (US) Bureau of Labor Statistics (BLS) will release the Nonfarm Payrolls (NFP) data for June on Thursday at 12:30 GMT.
With investors pricing in a hawkish Federal Reserve (Fed) policy outlook with the new Chairman Kevin Warsh at the helm, the underlying details of the employment report could influence the timing of a possible interest rate increase.
Payroll data is among the indicators that generally trigger a significant market reaction. Still, this time, with all eyes on the inflation front, only a dismal print could hurt the US Dollar in a meaningful way.
What to expect from the Nonfarm Payrolls report?
Investors expect NFP to rise by 110K following three consecutive months of surprisingly strong increases. The Unemployment Rate is seen holding steady at 4.3%, while the annual wage inflation, as measured by the change in the Average Hourly Earnings (AHE), is projected to edge higher to 3.5% from 3.4% in May.
TD Securities analysts note that they expect NFP to rise at a softer pace than what markets expect.
“We expect June payrolls to moderate to 80k (55k private, 25k government) after strong early‑2026 gains. Job growth broadened beyond healthcare, led by trade/transport and leisure, but should cool this month. Local governments may stay firm on World Cup effects. We see the Unemployment Rate edging down to 4.2% as participation dips. AHE likely moderated to 0.2% m/m (3.5% y/y),” they add.
The Automatic Data Processing (ADP) reported on Wednesday that private sector employment in the US grew by 98K in June. This print followed the 122K increase recorded in May and came in below the market expectation of 113K.
Similarly, National Bank of Canada Senior Economist Jocelyn Paquet forecasts a 90K increase in NFP and explain:
“Based on the weekly data released by ADP and previously published “soft” employment indicators, such as S&P Global’s flash composite PMI, job creation likely remained fairly robust during the month, although not as robust as what we had been accustomed to between February and May. Layoffs, for their part, may have increased slightly, judging by the rise in initial jobless claims recorded between the May and June survey periods. These two factors combined should, in our view, result in an increase of 90K in nonfarm payrolls.”
Economic Indicator
Average Hourly Earnings (YoY)
The Average Hourly Earnings gauge, released by the US Bureau of Labor Statistics, is a significant indicator of labor cost inflation and of the tightness of labor markets. The Federal Reserve Board pays close attention to it when setting interest rates. A high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.
How will the US May Nonfarm Payrolls affect EUR/USD?
Although crude Oil prices came down to levels seen since pre-US-Iran conflict, investors remain concerned over global inflation remaining sticky, mainly due to heightened costs of consumer electronics via AI-driven hardware demand. As a result, the US Dollar (USD) has been outperforming its major rivals, supported by growing expectations for a tighter Fed policy.
Hammack flags broad inflation, keeps rate hike option alive
In an interview with CNBC on Tuesday, Cleveland Fed President Beth Hammack delivered a moderately hawkish message with the FXS Speechtracker score at 6.4/10.
This is slightly softer relative to the historical average of 7/10 but still signals a tightening bias. By stressing that the job market is “right around full employment” and that growth “looks good,” while warning that “inflation is still too high” and that rate hikes may need to be considered, the speech underscores a willingness to tighten policy despite concerns about the broader economy.
According to the CME FedWatch Tool, markets are currently pricing in about a 34% probability of the Fed raising the interest rate by 25 basis points (bps) as early as July, compared to a 6% chance seen in early June. Moreover, the probability of at least two rate increases by the end of 2026 now sits slightly above 40%.
Another positive surprise of 130K or higher in the headline NFP could feed into July rate hike projections and fuel another leg higher in the USD. In this scenario, EUR/USD could remain under bearish pressure and extend its downtrend in the near term.
On the other hand, a significantly disappointing print below 70K could trigger an upward correction in the pair. However, a steady bullish reversal is unlikely to materialize unless Fed policymakers shift their tone and put more emphasis on labor market conditions rather than the inflation outlook.
Given three consecutive months of very strong prints, however, a single NFP miss is likely to be overlooked, keeping any potential rebound in EUR/USD short-lived.
Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD:
“EUR/USD’s near-term technical outlook doesn’t point to oversold conditions and suggests that the bearish bias stays intact. The Relative Strength Index (RSI) indicator on the daily chart remains below 40 after recovering from oversold territory and the pair trades slightly above the lower arm of the Bollinger Band.”
“On the downside, 1.1320-1.1280 (lower arm of the Bollinger Band, static level) forms the first support ahead of 1.1160 (static level) and 1.1000 (psychological level, static level).”
“Looking north, a strong resistance area could be spotted at the 1.1485-1.1500 region (20-day Simple Moving Average (SMA), round level) before 1.1600 (round level, 50-day SMA) and 1.1650-1.1660 (200-day SMA, descending trend line, 100-day SMA).”
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
Read the full article here
