EUR/USD and Risk Assets Rally as Weak US Payrolls Crush Rate Hike Bets

Broad market sentiment surged following the unexpected decline in US July non-farm payrolls, which dramatically reduced Federal Reserve rate hike expectations and sent the dollar lower across the board. EUR/USD and other major pairs benefited as traders repriced the Fed's policy trajectory, with futures markets now reflecting significantly lower odds of additional tightening. The negative payrolls print of -23K versus the +80K forecast represents a meaningful deterioration in the US labor market, suggesting the cumulative impact of elevated rates may be weighing on hiring. Equity markets gained alongside risk-sensitive currencies as lower rate expectations eased financial conditions. Bond yields pulled back, with the 10-year Treasury yield declining to 4.64%. The shift in rate expectations could provide sustained tailwinds for EUR/USD if upcoming data confirms labor market softening. Traders should monitor Fed speakers in the coming week for guidance on whether the central bank views this as a transitory anomaly or the beginning of a broader employment downturn.