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Source: Newsmaker.id
The EUR/USD pair closed slightly higher in Friday's trading (Oct 2) after the US dollar lost some momentum following a US labor market report that was significantly weaker than expected. The euro traded around US$1.1258, successfully moving away from the 17-month low touched in the previous session.
Sentiment toward the dollar weakened after September Nonfarm Payrolls showed an increase of only 29,000 jobs, far below the forecast of approximately 90,000. The unemployment rate also rose to 4.2%, while data for the previous month was revised downward. These conditions reinforced signals that the US labor market is beginning to cool.
The weak data prompted markets to aggressively scale back expectations for a Federal Reserve interest rate hike at the October meeting. The probability of a rate hike fell to around 20%—down from approximately 74% prior to the data release—thereby dampening the dollar's appeal and allowing the EUR/USD pair to rebound.
However, the euro's gains remained limited as US Treasury yields stayed elevated. The yield on the 10-year US Treasury note rose again to around 5.28%, marking a fifth consecutive week of gains. These high yields continued to support the dollar and capped the upside for EUR/USD.
In Europe, the euro also faced pressure from bond market volatility and fiscal concerns, particularly regarding France. The yield spread between French and German bonds widened to its highest level since the Eurozone debt crisis, reflecting growing investor anxiety over the region's fiscal health.
Inflationary pressures in the Eurozone also remained a focus, as rising energy prices pushed inflation above the 3% mark. Some ECB officials remain open to tighter monetary policy should price pressures persist, though rising long-term borrowing costs also threaten to slow the region's economic growth.
On a weekly basis, the dollar strengthened against the euro for the fourth consecutive week, indicating that Friday's EUR/USD rebound did not fully alter the short-term trend. Looking ahead, the pair will be highly sensitive to movements in Treasury yields, US inflation data, and further signals from the Federal Reserve regarding a potential rate hike in December.