EUR/USD gains traction near 1.0600, eyes on US NFP data

• EUR/USD gains momentum near the 1.0600 psychological mark on the weaker USD.
• The FOMC decided to keep the federal funds rate unchanged at 5.25–5.50%, as widely expected.
• The downbeat Eurozone economic data raises the fear of recession in the area.

The EUR/USD pair surges above 1.0580 during the early Asian session on Thursday. The weaker US Dollar (USD) after the Federal Open Market Committee (FOMC) policy meeting lends some support to the major pair. EUR/USD currently trades around 1.0597, up 0.26% on the day.

The FOMC decided to keep the federal funds rate unchanged at 5.25–5.50% on Wednesday, as widely expected. During the press conference, Fed Chair Jerome Powell said that the rise in long-end yields needs to be persistent and driven by higher-term premiums to influence monetary policy. Powell further stated that the current monetary policy is already restrictive. FOMC opens the door for another rate hike, but it does not seem very eager. The Greenback dropped after the meeting as markets believe that the rate hike cycle is already over.

On Wednesday, the US Private sector payroll growth increased modestly in October but missed expectations. The figure rose by 113,000 from 89,000 in September, below the market consensus of a 150k rise. Meanwhile, the JOLTS jobs opening data unexpectedly rose to 9.553M, better than the expectation of 9.25M. The ISM Manufacturing PMI registered the lowest reading since July, dropping to 46.7 in October.

On the other hand, the European Central Bank (ECB) decided to hold interest rates unchanged last week and the ECB is expected to start cutting interest rates in Q2 next year. The disinflationary pressures reflected sluggish GDP growth, while the PMI data also pointed to heightened risks of recession.

Earlier this week, the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for October came in at 2.9% YoY versus 4.3% prior, below the market consensus. The Core HICP eased to 4.2% from the previous reading of 4.5%. Additionally, the Eurozone Gross Domestic Product (GDP) for the third quarter (Q3) arrived at -0.1% QoQ from 0.1% expansion in the previous reading. On an annual basis, the growth numbers grew by 0.1% versus 0.5% prior. However, both growth figures were below market expectations.

Market participants will monitor the German Unemployment rate, Spain, and Italy’s HCOB Manufacturing PMI on Thursday. Traders will also take more cues from ECB’s Lane speech for fresh impetus. On the US docket, the US weekly Initial Jobless Claims will be due. The focus will shift to the US Nonfarm Payrolls on Friday, which is estimated to add 180K jobs in October. These events could give a clear direction to the EUR/USD pair.