The EUR/USD recovered from a more than two-year low on Friday, Nov. 7, after the U.S. Department of Labor released its latest monthly jobs report.
The currency pair fell to as little as 1.2357, its lowest in 26 months, according to Reuters. However, the EUR/USD rose to as much as 1.2439, before consolidating at 1.2422, 0.41 percent higher for the session, Investing.com reported.
After the Labor Department report showed the nation’s employers adding 214,000 positions during October, global markets pushed the greenback lower, according to the news source. The actual figure for monthly gains fell short of the expected increase of 231,000.
The government report also showed that the unemployment rate ticked lower during the month, falling to 5.8 percent, after lingering at 5.9 percent. Greg Anderson, global head of FX strategy for BMO Capital Markets in New York, commented on how this news impacted the greenback, according to Reuters.
“The reaction to the data is an indication that the market is running tired of the dollar up-move,” he told the news source. “The market is quite long of dollars and needs perfection to move higher. This data, if we had seen this three months ago, would have the dollar rallying. This is a solid report.”
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Another major factor that could have influenced the recent price movements in the EUR/USD is speculation surrounding central bank policy. The Federal Reserve recently ended its latest round of bond purchases, QE3. Between September 2012 and the end of 2014, the financial institution had been purchasing bonds at the rate of $85 billion per month.
However, it began gradually lowering that pace at the start of this year. Trimming these bond purchases by $10 billion per month, the Fed slowly reduced this form of stimulus until it ceased completely in October. Now, the central bank is looking at the timeline it will use to increase its benchmark interest rates.
While markets are looking for when the Fed will continue reducing its stimulus, European Central Bank President Mario Draghi reiterated his pledge on Thursday, Nov. 6 to do whatever is needed to help improve economic conditions in the euro zone, according to Reuters.
“The ECB increased its dovish rhetoric, including a reference to its balance-sheet size in the bank’s main statement, which suggests there is general agreement on the Governing Council for this emphasis. That will keep the euro under pressure, we believe,” Morgan Stanley wrote in a note, the media outlet reported.
The euro zone’s central bank is certainly not alone in its view that more monetary stimulus is needed in the 18-nation region, as the U.S. and the International Monetary Fund encouraged the ECB to step up what it is doing currently while at a conference in Paris, according to the news source.
Investors who trade forex might consider learning more about the recent price movements in the EUR/USD before they make any transactions. Doing so might help them make better-informed decisions.
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