• EUR/USD falls as investors stay cautious ahead of the US official employment and the Manufacturing PMI data for October.
• The US presidential election could potentially inject volatility into the major pair as a Trump win could hurt the Eurozone’s export sector.
• Market expectations for large rate cuts from the ECB in December have diminished amid a pickup in inflation and higher growth.

EUR/USD slumps from a fresh two-week high near 1.0890 in European trading hours on Friday. The major currency pair declines as the US Dollar (USD) bounces back amid caution ahead of the release of the United States (US) Nonfarm Payrolls (NFP) and the ISM Manufacturing Purchasing Managers’ Index (PMI) data for October, which will be published in the New York session.

Economists expect the US economy to have added 113K fresh payrolls, significantly lower than the 254K increase seen in September. The Unemployment Rate is expected to have remained steady at 4.1%. 

Investors will pay close attention to the employment data as it will significantly influence market expectations for the Federal Reserve (Fed) interest rate path. Recent commentary from Fed officials indicates that the central bank is more focused on reviving labor market strength after gaining confidence about inflation returning to the bank’s target of 2%.

Traders are fully pricing in a 25 basis points (bps) rate cut at the Fed’s next meeting on Thursday, and the NFP is unlikely to alter this outlook unless there is a huge surprise. However, the data could have implications for the Fed’s December meeting: higher-than-expected payroll data would point to improving labor market conditions – which could dampen Federal Reserve (Fed) rate cut bets –, while weak employment numbers would boost them.