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Forex - EUR/USD rallies over 1% to 2-1/2 week highs
Published Jun 03, 2016 10:22AM ET
© Reuters. Euro climbs sharply against the dollar on downbeat U.S. data
Investing.com - The euro rallied over 1% to two-and-a-half week highs against the U.S. dollar on Friday, after data showing that the U.S. economy added far less jobs than expected last month sent the greenback broadly lower.
EUR/USD hit 1.1350 during U.S. morning trade, the pair’s highest since May 17; the pair subsequently consolidated at 1.1345, jumping 1.72%.
The pair was likely to find support at 1.1137, the session low and resistance at 1.1382, the high of May 13.
The Labor Department said the U.S. economy added 38,000 jobs in May, far below expectations for an increase of 164,000. The economy created 123,000 jobs in April, whose figure was revised from a previously estimated gain of 160,000.
However, the report also showed that the U.S. unemployment rate fell to a more than eight-year low of 4.7% last month from 5.0% in April, compared to expectations for a downtick to 4.9%.
Average hourly earnings rose by 0.2% in May, in line with expectations.
The report dampened optimism over the strength of the U.S. job market et lowered expectations for a rate hike by the Fed this month.
Fed Chair Janet Yellen said late last week that it could be appropriate to raise rates in the coming months if the economy and the labor market continue to pick up as expected.
In addition, the Institute of Supply Management said its non-manufacturing purchasing manager's index fell to 52.9 last month from 55.7 in April. It was the weakest reading since February 2014. Analysts had expected the index to drop to 55.5.
A separate report showed that the U.S. trade deficit widened to $37.40 billion in April from $35.50 billion in March, whose figure was revised from a previously estimated deficit of $40.40 billion. Analysts expected the trade deficit to widen to $41.30 billion in April.
The euro had showed little reaction after the European Central Bank left its benchmark interest rate unchanged on Thursday and warned that inflation in the euro area is likely to remain very low, or negative, for some time.
The ECB revised its inflation forecast for 2016 up to 0.2% from 0.1% before, but kept its inflation forecasts for 2016 and 2017 at 1.3% and 1.6% respectively.
The central bank also raised its growth forecast for 2016 up to 1.6% from 1.4%, but left its forecasts for the following two years unchanged.
The euro was also higher against the pound, with EUR/GBP gaining 0.92% to 0.7803.
Investors shrugged off a report by research group Markit earlier in the day saying that its U.K. services PMI rose to 53.5 last month from a reading of 52.3 in April. Analysts had expected the index to rise to 52.5 in April.
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