US March NFP likely to ease as economic uncertainty intensifies

• Nonfarm Payrolls are forecast to rise by 135K in March, following a 151K gain reported in February.
• The United States Bureau of Labor Statistics will release the jobs data on Friday at 12:30 GMT.
• US labor data could impact the Fed’s interest rate path, potentially affecting the US Dollar’s price action.

The all-important United States (US) Nonfarm Payrolls (NFP) data for March will be released by the Bureau of Labor Statistics (BLS) on Friday at 12:30 GMT.

Amidst US President Donald Trump’s tariff policies-induced increased recession risks and escalating trade war fears, the details of the March employment report will be closely scrutinised to gauge the Federal Reserve’s (Fed) next interest rate move and the US Dollar’s (USD) performance in the near term.

Trump announced on Wednesday a 10% baseline tariff on most goods imported to the US, with much higher duties on products from dozens of countries, including its major trading partners  – China, Japan and the European Union (EU).

What to expect from the next Nonfarm Payrolls report?

Economists expect the Nonfarm Payrolls to rise by 135,000 jobs in March, following a 151,000 job gain in February. The Unemployment Rate (UER) is likely to remain at 4.1% during the same period.

Meanwhile, Average Hourly Earnings (AHE), a closely watched measure of wage inflation, are expected to increase by 3.8% year-over-year (YoY) in March, following a 4.0% growth in February.

Following the March policy meeting, the Fed left its benchmark policy rate in the 4.25%-4.50% range, but the Bank’s updated quarterly projections, the so-called Dot Plot chart, signalled two interest rate cuts this year. The Fed also raised its inflation forecast while lowering its growth and employment outlook due to the impact of Trump’s tariffs, fueling concerns about potential stagflation in the US.

Fed Chairman Jerome Powell, in his post-policy press conference, stated that “uncertainty around policy changes and economic effects is high” due to US tariffs. “If the labor market weakens, we can ease if needed,” Powell noted before quickly adding that “we are not going to be in any hurry to move on rate cuts.”

Therefore, the March jobs data will likely hold the key to gauging the US labor market conditions, which could alter expectations for this year’s Fed rate cuts. Markets are fully pricing in the US central bank’s likely resumption of its rate-cutting cycle in June.

Previewing the March employment report, TD Securities analysts said: “Payrolls likely lost modest momentum in March amid rising uncertainty around the US economic outlook and given DOGE-related layoffs.”

“We also look for the UE rate to rise for a second month straight to 4.2%,” they added.

How will US March Nonfarm Payrolls affect EUR/USD?

The US Dollar has been on the losing end against its major currency rivals due to heightened fears of a recession, primarily driven by US President Trump’s aggressive tariff policies. Will the US NFP report help change the USD’s fate?  

Earlier in the week, the BLS reported that the JOLTS Job Openings declined to 7.56 million in February, down from 7.76 million in January. The reading hit the lowest level since September 2024. Meanwhile, the Automatic Data Processing (ADP) published data on Wednesday, which showed that the American private sector added 155,000 jobs in March, a sharp increase from the upwardly revised 84,000 in February and better than the forecast for 105,000.

That said, the stakes are high as the US employment data release approaches, amid increased expectations that the Fed will need to opt for aggressive rate cuts in the wake of the economic fallout from Trump’s tariffs.

Hence, a disappointing labor market report, with an NFP reading below 120,000, could bring forward expectations for a May Fed rate cut. In this scenario, the USD is expected to see a fresh leg lower, driving EUR/USD further northward. Conversely, market participants could refrain from pricing in a May rate cut if the NFP data offers a positive surprise with a reading above 150,000.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“The main currency pair trades close to its highest level in seven months above the 1.1050 level, with the 14-day Relative Strength Index (RSI) holding within the overbought region. This suggests that there is a scope for a fresh pullback. Buyers look for acceptance above the 1.1050 psychological level for a sustained uptrend. Further north, the seven-month high of 1.1147 could be retested.”

“In case EUR/USD fails to sustain above 1.1050, the immediate support will come in at 1.0900. A daily close below this support level could prompt a test of the 21-day Simple Moving Average (SMA) at 1.0860. A deeper correction will likely challenge the 200-day SMA at 1.0731.”