Investing.com -- EUR/USD fell sharply on Thursday, suffering its worst one-day sell-off in three weeks, as currency traders awaited a key U.S. jobs report for further indications on potential divergence between the European Central Bank and the Federal Reserve.
The currency pair traded between 1.1386 and 1.1494, before settling at 1.1404, down 0.0087 or 0.72% on the session. With the sharp losses, the euro dipped below 1.14 against the dollar for the first time this month. EUR/USD has followed a six-day winning streak from last week with a modest losing skid over the last three sessions. Over the last month, the euro is virtually flat against its American counterpart – up 0.11% during that span.
EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1713, the high from Aug. 24.
On Thursday morning, the U.S. Department of Labor said initial jobless claims increased by 17,000 to 274,000 last week, slightly above consensus estimates of 262,000. The amount represented the largest one-week spike in 16 months. Still, the 4-week Moving Average increased by only 2,000 to 258,000, remaining below the same measure a month ago. It came one day after the ADP Research Institute said private payrolls rose by 156,000 in April, sharply below consensus estimates of 193,000. Over the first three months of the year, the labor market has added an average of 202,000 private jobs per month.
When the Bureau of Labor Statistics (BLS) releases its April jobs report on Friday morning, analysts expect an increase of 200,000 in nonfarm payrolls following gains of 215,000 a month earlier. Economists are also anticipating a slight dip in the unemployment rate by 0.1% to 4.9%. The rate has lingered near multi-year lows over the last several months. More critically, analysts will keep a close eye on average hourly wages, which are expected to tick up by 0.3%, mirroring a considerable 0.3% uptick in March. Even as the U.S. economy has emerged from a prolonged recession, wages have remained stubbornly low since the Financial Crisis.
After holding short-term interest rates steady last month, the Federal Reserve has indicated that it will take a data driven approach with the timing of its next rate hike. The Federal Open Market Committee (FOMC) has left its benchmark Federal Funds Rate at its current level between 0.25 and 0.50% in each of its three meetings this year.
Speaking exclusively with CNBC on Thursday, Atlanta Fed president Dennis Lockhart said the Fed should "keep the option open" to consider raising short-term rates in June. At the same time, San Francisco president John Williams reiterated that he supports "two to three rate hikes" this year.
The FOMC's next meeting on June 14-15 will come days before a controversial referendum in the U.K. on its status in the European Union. A vote paving the way for a so-called "Brexit," could have broad implications on global financial and foreign exchange markets. Earlier this week, Lockhart outlined the risk of Britain's departure from the EU at a closely-watched speech in Amelia Island, Florida.
"It is the repercussions for the U.S. economy that would concern me," Lockhart said. "It's really a question of indications in financial markets of a reaction to rising uncertainty and the degree of volatility we are seeing again in financial markets."
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.55% to an intraday high of 93.86, before falling slightly back to 93.73. Despite the gains, the index is still down by more than 6% since early-December.