The dollar strengthens against the euro despite conflicting signals from the US employment report

Mixed Labor Market Data Maintains Pressure on EUR/USD

Friday’s session saw further weakening of the EUR/USD pair, which hovered around the 1.1638 level. This marks the seventh consecutive day of declines for the European currency, while the US dollar continues to strengthen its position against major currency pairs. The market is reacting to the recently published report on the US labor market, which presents a complex picture of economic trends.

NFP Data Below Expectations, Unemployment Still Falls

The US Bureau of Labor Statistics reported that the number of new non-farm payroll jobs last month was 50,000. This result was disappointing compared to the forecast of 60,000 and significantly weaker than the previous month’s increase of 64,000. At the same time, the unemployment rate decreased to 4.4%, surpassing market expectations of 4.5% and better than the previous reading of 4.6%.

US Wages Accelerate — Additional Support Signal for the Dollar

Wage data brought positive surprises. Average hourly earnings increased by 0.3% month-over-month, aligning with forecasts but notably higher than the November increase of 0.1%. Scaling the results to an annual change, the wage growth rate in the US accelerated to 3.8%, representing an increase both compared to the previous month (3.6) and exceeding analysts’ expectations.

Federal Reserve Likely Waiting — Implications for EUR/USD Pair

The published report shows a mixed scenario: although employment growth was below expectations, the simultaneous decrease in unemployment and acceleration in wage growth indicate ongoing labor market flexibility. For the Federal Reserve, the signal is clear — weaker job creation pace, despite generally favorable conditions, suggests that the institution will keep its interest rates unchanged during the session scheduled for January 27-28. However, some analysts predict a gradual shift toward monetary policy easing later in the year, which could influence future EUR/USD growth prospects.

What’s Next — Guidance from Upcoming Data and Decision Makers

Investors will now focus on the preliminary monthly consumer sentiment survey conducted by the University of Michigan, which will provide additional insights into consumer demand. Also significant will be upcoming statements from regional Federal Reserve presidents — Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari — who may shed light on the Fed’s approach to future monetary policy path and its impact on currency relations.