EUR/USD softens as US Dollar firms on mixed labor data and weak Eurozone Retail Sales

• EUR/USD slips as the US Dollar steadies on mixed US labor data and weak Eurozone Retail Sales.
• US private payrolls increased by 54K in August, below the 65K forecast and sharply lower than July’s revised 106K.
• Focus now on US services sector data, with S&P Global PMIs expected to hold steady at 55.4 and ISM Services PMI projected at 51.0.

The Euro (EUR) is under pressure against the US Dollar (USD) on Thursday, with EUR/USD retracing part of Wednesday’s advance and trading near 1.1645 at the start of the American session. The mild pullback comes as the Greenback regained traction following a mixed set of US labor market data, while softer Eurozone Retail Sales added to pressure on the Euro.

The ADP Employment report showed that US private payrolls increased by 54,000 in August, undershooting expectations of 65,000 and down sharply from July’s revised 106,000, pointing to slower hiring momentum. Weekly Initial Jobless Claims also ticked up to 237,000 from 229,000, suggesting a modest rise in layoffs. At the same time, Q2 Nonfarm Productivity was revised higher to 3.3% from 2.4%, while Unit Labor Costs eased to 1.0% compared with 1.6% expected, indicating that wage pressures are cooling.

The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, is ticking higher, trading near 98.30, retracing part of Wednesday’s losses. The index remains confined within the narrow range that has defined trading since early August, suggesting investors are awaiting Friday’s Nonfarm Payrolls (NFP) report for a clearer directional cue.

In the Eurozone, July Retail Sales fell 0.5% MoM, a deeper drop than the 0.2% forecast and reversing June’s 0.6% gain. On an annual basis, sales rose 2.2%, missing the 2.4% forecast and down from the 3.5% pace recorded previously. The figures point to weaker household demand, adding to concerns about the bloc’s growth outlook even as inflation remains slightly above the European Central Bank's (ECB) 2% target.

Looking ahead, attention turns to the US services sector, with both S&P Global and ISM Purchasing Managers Index (PMI) readings for August due later on Thursday. The S&P Global Composite and Services PMI are expected to hold steady at 55.4, signaling continued expansion. From the ISM survey, the headline Services PMI is seen improving modestly to 51.0 from 50.1, while sub-indices on Employment, New Orders, and Prices Paid will provide additional insight into service-sector momentum and inflation pressure.