• EUR/USD bears have sunk in their teeth as the US dollar starts off strong.
• The US data on Friday is being digested with more to come this week in CPI and Retail Sales.

EUR/USD is under pressure in the Tokyo equities morning session as the greenback rallies into the peak formation formed on Friday as Europe opened for its last session of the week. At the time of writing, EUR/USD is trading 0.42% higher and has firmed from a low of 106.89 and has printed a recent high of 107.34.

After some volatility, markets steadied following the tragic assassination of the former Japanese PM Shinzo Abe. The focus moved to the US data in the Nonfarm Payrolls labour market report which beat expectations. This upset risk assets such as stocks given that the outcome has pushed back against expectations that US domestic demand may be rapidly moving towards contraction.

Payrolls jobs gains beat expectations, rising 372k vs expectations of 265k and the Unemployment Rate was steady at 3.6% for a fourth consecutive month. The average hourly earnings also remained stable at 0.3% MoM and 5.1% YoY. However, the Participation Rate lost 0.1% to 62.2%.

”Labour supply is still not recovering amid very strong jobs demand,” analysts at ANZ bank said in a note on Monday when assessing the data. ”The household survey showed unemployment broadly unchanged at 5.9m. Clearly, the pool of available skilled workers remains very tight. The number of people prevented from looking for work because of the pandemic was 610k, up from 455k in May. Total non-farm employment is 524k or 0.3% below pre-pandemic levels.”

For the week ahead, the focus will be on US data again with a void on the eurozone calendar. Instead, the main event will be the publication of June’s consumer Price Index report. Analysts at the National Bank of Canada argue that ”the food component likely remained very strong given severe supply constraints globally, and this increase may have been compounded by sharply higher gasoline prices. As a result, headline prices could have increased 1.2% MoM, lifting the year-on-year rate to a 40-year high of 8.8%.”

Traders will also take note of the US Retail Sales. A recovery in June is expected, following the series’ first contraction this year in May. ”Spending was likely aided by another firm showing in gasoline station sales and a rebound in the auto segment,” analysts at TD Securities said. ”We also look for another gain in the eating/drinking segment as consumers continue to transition away from goods. That said, control group sales likely fell again.”