Euro tight awaiting NFP

The Euro stalled after reaching 1.0667 but remains above the key support of the 1.0600 mark during the early Asian session on Friday. A fall in US Treasury bond yields and the correction of the US Dollar (USD) lend some support to the pair. The 10-year Treasury yield stands at 4.66%, the lowest level since October 13. Traders will take more cues from the US Nonfarm Payrolls (NFP) report on Friday for fresh impetus. The figures are expected to increase 180,000 jobs in October. The major pair currently trades around 1.0620, losing 0.01% on the day.

Markets anticipate that the Federal Reserve (Fed) is already done with the hiking cycle. Fed Chair Jerome Powell has made it clear that financial conditions will need to remain tight to avoid further rate rises. Powell added that the central bank would take action to bring inflation back to the 2% target, but the policy choices will remain highly data-dependent. According to the CME FedWatch Tool, the probability of a 25 basis-point (bps) rate raise in the December meeting remains low around 20%, putting more pressure on the USD.

On Thursday, the US weekly Initial Jobless Claims rose to the highest level in seven weeks, coming in at 217,000 from 212,000 in the previous reading, higher than the 210,000 estimated. Meanwhile, the Unit Labor Cost for the third quarter dropped by 0.8% from a rise of 2.2% in the previous reading, worse than the expectation.

On the Euro front, HCOB's final Eurozone Manufacturing PMI dropped to 43.1 in October from September’s 43.4, above the first estimation of 43.0. A reading below 50 indicates a contraction in activity. With Manufacturing PMIs in France, Italy, and Spain plummeting and Germany already indicating a severe recession, it is evident that the sector will contract in each of these nations during the current quarter. This, in turn, might cap the Euro’s upside and act as a headwind for the EUR/USD pair.

Looking ahead, market participants will monitor the Eurozone Unemployment rate and the US employment data, including Nonfarm Payrolls and Average Hourly Earnings. Also, the US ISM Services PMI will be due later on Friday. These data could give a clear direction to the EUR/USD pair.