EUR/USD – Euro Jumps on Strong Eurozone Job Numbers

EUR/USD has posted strong gains on Thursday, as the pair trades at 1.0850 in the European session. In economic news, Eurozone Unemployment Change dropped to 10.5%. In Germany, Factory Orders easily beat expectations but Retail Sales fell short of the estimate. Over in the US, today’s key event is Unemployment Claims, with the markets expecting the indicator to drop to 271 thousand.

The euro has sharply reversed directions on Thursday. EUR/USD has posted gains of over 100 points since Tuesday, recovering the losses sustained by the pair early in the week. The euro has benefited from some positive releases out of the Eurozone. Unemployment Change dipped to 10.5%, marking a third consecutive drop, as well as beating the forecast of 10.7%. In Germany, numbers were mixed. Factory Orders softened to 1.5%, but this crushed the estimate of 0.1%. Retail Sales gained 0.2%, marking the first gain in four months. Still, the markets expected more, with a forecast of 0.5%. On Wednesday, Services PMIs out of Germany and the Eurozone beat expectations, with both indicators pointing to expansion in the services sector. These solid releases give the ECB some breathing room with regard to further easing steps, which would likely push the euro lower.

In the US, employment data started off 2016 in style, jumping to 257 thousand in December. This crushed the forecast of 193 thousand, and was the strongest gain since June 2014. The ISM Non-Manufacturing PMI came in at 55.3 points, short of the estimate of 56.0 points. Still, this reading points to solid expansion in the services sector and underscores that the US economy is headed in the right direction. The Federal Reserve released the minutes of its December policy meeting, at which it raised rates by 0.25 percent. The minutes were noteworthy in highlighting differences among policymakers as to whether US inflation levels will improve. Indeed, some FOMC members said that their vote in favor of a rate hike was a close call. The Fed has hinted that the December rate is the first of a series of incremental moves in 2016, but inflation levels will play an important role in the timing and size of future rate hikes.

EUR/USD Fundamentals

Thursday (Jan. 7)

• 7:00 German Factory Orders. Estimate 0.1%. Actual 1.5%

• 7:00 German Retail Sales. Estimate 0.5%. Actual 0.2%

• 9:00 Italian Monthly Unemployment Rate. Estimate 11.5%. Actual 11.3%

• 9:10 Eurozone Retail PMI. Estimate 49 points

• 10:00 Eurozone Unemployment Rate. Estimate 10.7%. Actual 10.5%

• 10:00 Eurozone Retail Sales. Estimate 0.2%. Actual -0.3%

• 12:30 US Challenger Job Cuts

• 13:30 US Unemployment Claims. Estimate 271K

• 15:30 US Natural Gas Storage. Estimate -95B

Upcoming Key Events

Friday (Jan. 8)

• 13:30 US Average Hourly Earnings. Estimate 0.2%

• 13:30 US Nonfarm Employment Change. Estimate 203K

• 13:30 US Unemployment Change. Estimate 5.0%