EUR/USD fell after a stronger US jobs report lifted the US Dollar. The pair traded near 1.1875 after dropping about 68 pips to an intraday low around 1.1833.
US Nonfarm Payrolls rose by 130K in January, above forecasts near 70K and higher than December’s revised 48K. The Unemployment Rate dipped to 4.3% from 4.4%.
Jobs Revisions Reshape The Outlook
The BLS revised March 2025 total nonfarm employment down by 898K. It also cut total 2025 job growth to 181K from 584K, with average monthly growth in 2025 at 15K.
Average Hourly Earnings increased by 0.4% month-on-month in January, up from 0.1% and above the 0.3% forecast. Annual wage growth held at 3.7% year-on-year, above the 3.6% estimate.
Interest-rate futures now almost fully price the Fed policy rate to stay in the 3.50%–3.75% range at the March and April meetings, per CME FedWatch. The US Dollar Index traded near 96.95 after an intraday low around 96.49.
The strong January jobs report is a head-scratcher when we look at the huge downward revisions for all of 2025. This tells us the US economy was much weaker last year than we thought, creating a confusing picture for the dollar’s direction. For the next few weeks, we should expect EUR/USD to be pulled between the strong recent data and the weak underlying trend.
Rate Expectations Support The Dollar
With US wage growth holding at 3.7% and the most recent CPI data from last month showing core inflation is still stubborn at 3.9%, the Federal Reserve has no immediate pressure to cut rates. The market is now pricing in a hold for both the March and April meetings, which should provide a short-term floor for the US dollar. This makes aggressive bets against the dollar risky in the immediate future.
On the other side of the pair, the European Central Bank is dealing with a different situation, as January’s flash inflation estimate for the Eurozone cooled to 2.8%. This opens the door for the ECB to potentially cut rates sooner than the Fed, creating a policy divergence that could weigh on the euro. We believe this dynamic will cap any significant upside for the EUR/USD pair.
The conflicting economic signals are causing uncertainty, which is pushing up the cost of options. We are seeing 1-month implied volatility for EUR/USD climb above 7.0%, suggesting the market is bracing for a larger-than-usual price swing. This environment makes buying volatility through strategies like straddles a compelling way to trade, profiting from a breakout in either direction.
Alternatively, for those who believe the market will remain indecisive, selling volatility could be the better play. Given the strong technical levels, establishing a range-bound strategy like an iron condor on EUR/USD options might be prudent. This approach would benefit from the pair staying stuck in a choppy pattern while traders digest the major revisions to last year’s data.
