Strong employment data has deprived Fed doves of one of their key arguments. Hawks no longer need to worry that tighter monetary policy will significantly undermine the labor market. Donald Trump, as usual, remains opposed to tighter policy. Let’s discuss this and develop a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- Employment came in three times higher than expected.
- The likelihood of a Fed rate hike remains unchanged.
- Trump is calling for monetary expansion.
- A false-breakout strategy is relevant for the EUR/USD pair.
Weekly Fundamental Forecast for Dollar
Things have become mixed up in the financial markets. Positive economic news is causing stock indices to fall. Coupled with the escalation of the conflict in the Middle East, the resumption of the oil rally, rising Treasury yields, and a surge in employment of 162,000—three times higher than forecasts—this should significantly strengthen the US dollar. However, the EUR/USD pair quickly returned to its previous levels after an initial decline in response to the BLS report. What’s the catch?
US Non-Farm Payrolls
Source: Wall Street Journal.
In 2026, the US economy is creating an average of 80,000 jobs per month. This is significantly more than the 10,000 average in 2025, although it still falls short of the 122,000 recorded in 2024. Nevertheless, the August report removes a major obstacle to an imminent Fed rate hike. Had employment weakened significantly, FOMC doves would have gained a key argument in favor of maintaining the current monetary policy stance. Meanwhile, hawks would have been less concerned that monetary tightening could cause the labor market to freeze up.
Strong NFP data removes a barrier but does not provide sufficient grounds for a September rate hike. Indeed, the odds of monetary tightening at the upcoming FOMC meeting have remained virtually unchanged, which has determined the fate of the EUR/USD pair. The market remained largely unresponsive to both the employment data and calls from FOMC hawk Beth Hammack that it is time for the central bank to act.
Market Expectations for US Interest Rate
Source: Bloomberg.
Especially since the head of the Cleveland Fed had a formidable opponent. Donald Trump called on the Fed to ease monetary policy, if only out of patriotism. He argued that a strong economy requires low interest rates. If the central bank refuses to lower them, the president will cut off trade with countries with which the US runs trade deficits.
It seems that Recep Erdogan’s experience has taught him nothing. A few years ago, the Turkish president tried to combat accelerating inflation through monetary expansion. As a result, prices skyrocketed by more than 80%, and a currency crisis erupted. The US administration appears to be out of touch with reality. Donald Trump is calling for lower interest rates, while Scott Bessent claims that an end to the conflict in the Middle East will push Brent crude down to $40 per barrel.
The stability of the EUR/USD pair is driven not only by expectations around US inflation data but also by possible hawkish signals from the ECB following its monetary policy tightening in September—a development the market has already priced in.
Weekly Trading Plan for EUR/USD
Ahead of key events, the likelihood of consolidation in the EUR/USD pair is increasing, along with the risk of false breakouts from the 1.157–1.164 trading range. It makes sense to consider selling the euro on pullbacks below the range’s upper boundary and buying on a failed test of the lower boundary.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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