EUR/USD Surges on Fed Rate Hike Odds Collapse

The EUR/USD pair surged to 1.1570 after the July payrolls report showed a decline of 23,000 jobs against an expected gain of 80,000. The dollar index fell, breaking the 99.55 trigger that had been watched by dollar bears.

The Federal Reserve's September hike odds collapsed from 67% to 44% within minutes of the release, with a 137.5 basis point policy differential shrinking between the ECB and Fed interest rates.

While the payrolls internals showed some negative signs, such as a decline in labor force participation and an increase in temporary layoffs, the overall reaction was driven by the repricing of the Federal Reserve's rate hike expectations.