EURUSD SELL

The euro sank on Thursday and lost most of its FOMC-induced gains, dragged down by broad-based U.S. dollar strength, higher U.S. yields, risk-off sentiment in the equity market, and growing concerns about the outlook for the European Union after March German factory orders tumbled more than expected. At noon, EUR/USD was 1% lower, trading at 1.0510 and steadily approaching its May’s low. The sharp slowdown in Germany, the country with the largest GDP in the bloc, raises the question of how quickly and forcefully the ECB can withdraw stimulus without strangling activity and pushing the regional economy into a deep recession.

Over a medium-term horizon, monetary policy divergence between the ECB and the Fed and the fallout from the Ukrainian war may continue to weigh on the euro against the greenback, possibly creating the right conditions for exchange rate parity between the two currencies, but that story is for another day.

Focusing on the near term, all eyes will be on the U.S. economic calendar on Friday, when the U.S. Bureau of Labor Statistics releases the latest nonfarm payrolls data. According to analysts surveyed by Bloomberg News, the North American economy created 391,000 jobs in April, down slightly from the 431,000-increase seen in March. With this result, the unemployment rate is seen inching down from 3.6% to 3.5%, matching the pre-pandemic low set in early 2020.