The Euro (EUR) posted moderate gains against the US Dollar (USD) on Friday, trading just below the 1.1750 level and reversing Thursday's losses, despite ongoing geopolitical tensions in Iran and weaker-than-expected German economic data. The EUR/USD pair remains within its three-week trading range, capped below the 1.1800 resistance area, with technical indicators showing mixed momentum and a need for further impetus to break higher [1].
Geopolitical risk aversion increased after reports of an exchange of fire between the US and Iran in the Strait of Hormuz, which dampened hopes for a swift peace deal. US President Donald Trump stated that the ceasefire remains in place and urged Iran to sign a deal, while Iranian authorities are reviewing a 14-point US proposal to end the conflict [1][3]. According to Iran’s top military commander, the US targeted an Iranian oil tanker and civilian areas, while the US claimed its actions were in response to attacks on its naval forces [3].
In Europe, German industrial production contracted for the second consecutive month in March, contrary to expectations for a rebound, and the trade balance narrowed due to a sharp rise in imports offsetting increased exports [1].
Attention is now focused on the US Nonfarm Payrolls (NFP) report for April, which is expected to show a slowdown in job creation. Market consensus estimates range from a gain of 55,000 jobs and a steady unemployment rate at 4.3% [4], to a moderate +65,000 [2], and 62,000 [3]. However, some analysts predict a net loss of 15,000 jobs [4], while others, such as Bank of America, expect a strong report with 80,000 jobs added, particularly in education and health sectors [4]. The average hourly earnings are expected to rise from 3.5% to 3.8% year-over-year [4].
The US Dollar Index (DXY) has rebounded to the 98.20 area from Thursday’s 97.80 lows, supported by positive labor market indicators such as lower initial jobless claims and a stronger ADP report [2][3]. However, analysts at MUFG and other sources suggest that even if the NFP surprises to the upside, a sharp hawkish repricing of US rate expectations is unlikely, which should limit further dollar strength [2]. Higher oil and gas prices, up more than 50% since the start of the year due to the Iran conflict, are also weighing on consumer sentiment and could impact the broader economy [4].
Overall, the market remains cautious, with the EUR/USD and DXY trading in established ranges as investors await the US jobs data for further direction.
CONCLUSION
Markets are in a holding pattern as traders await the US Nonfarm Payrolls report, with the Euro and US Dollar steady amid geopolitical tensions and mixed economic data. While labor market indicators suggest potential upside for the dollar, analysts expect any gains to be limited by the Federal Reserve's cautious stance. Elevated energy prices and uncertainty over job growth continue to shape market sentiment.