The Euro (EUR) edges higher against the US Dollar (USD) on Tuesday after brief two-way volatility as traders digested the delayed US labour market and consumer spending data. At the time of writing, EUR/USD is trading around 1.1800, its highest level since September 24, up nearly 0.25% on the day, as the Greenback remains under sustained pressure.
The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) rose by 64,000 in November, modestly beating market expectations for a 50,000 increase. In contrast, October payrolls contracted by 105,000, a sharp reversal from September’s 108,000 gain, which was revised down from an initial estimate of 119,000.
The Unemployment Rate climbed to 4.6% in November, exceeding market expectations of 4.4% and marking the highest level since September 2021. At the same time, the labour force participation rate edged up to 62.5% from 62.4%.
The report also showed that US payrolls were revised down by a combined 33,000 over August and September, echoing remarks from Federal Reserve (Fed) Chair Jerome Powell, who warned at last week’s post-meeting press conference that job gains since April may have been overstated by around 60,000.
Wage growth showed further signs of easing in November. Average Hourly Earnings rose just 0.1% MoM, falling short of market expectations for a 0.3% increase and slowing sharply from the previous 0.4% gain. On an annual basis, wage growth eased to 3.5% from 3.7%.
October Retail Sales data sent a mixed signal. Headline sales were unchanged on the month, missing market expectations for a 0.1% increase. However, the underlying details were more supportive, with Retail Sales excluding Autos rising 0.4%, while the Control Group jumped 0.8%, comfortably beating forecasts.
Taken together, the mixed US data reinforced the Fed’s cautious approach to further policy easing after delivering 75 basis points of rate cuts this year to support the labour market. While policymakers are widely expected to hold rates at the January meeting, investors continue to price in two rate cuts in 2026.
Against this backdrop, the US Dollar remains under pressure, with the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, hovering near 97.96, its lowest level since October 3.
Adding to the Dollar’s downside, the preliminary S&P Global Purchasing Managers Index (PMI) surveys for December pointed to a loss of momentum in business activity. The Composite PMI slipped to 53.0 from 54.2, while Manufacturing PMI eased to 51.8 from 52.2 and the Services PMI fell to 52.9 from 54.1.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.