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There are 2 main reasons for the euro’s weakness and the first is risk aversion. Weak economic data and pessimistic comments from the central banks of Europe have made investors extremely nervous about the outlook for the global economy. For this reason, every piece of bad news, including today’s non-farm payrolls report has made investors more risk averse.

The second reason why the EUR/USD experienced such a large decline is because investors believe that the ECB will expand its balance sheet at a faster pace than the Federal Reserve. In plain English, this means that they expect the ECB to be more aggressive than the Fed in easing monetary policy. 

http://www.bkassetmanagement.com/featured/what-drove-eurusd-to-a-fresh-2-year-low/

 today’s jobs number spells big trouble for the Federal Reserve and for President Obama. The magic number today was 100k and unfortunately American companies added only 80k jobs in June. After the small upward revision to the May report, non-farm payrolls were virtually unchanged. Federal Reserve officials hoped that today’s jobs number would allow them to coast on the monetary easing of other central banks and spare them from QE3. Unfortunately this won’t be the case.

http://www.bkassetmanagement.com/us-outlook/non-farm-payrolls-will-force-fed-to-keep-pace-with-ecb/

Economic figures out of the US this morning were encouraging heading in to tomorrow’s all-important Non-Farm Payroll report. The ADP Employment Change showed 176k new jobs created in June with small businesses leading the way with 53% of the total.  NFP number tomorrow should beat estimates of 90k. Being that most will expect a better than forecast number tomorrow, anything less than 90k will likely create a risk rally as the implication would likely be that the Federal Reserve would initiate QE3 at their next policy decision in early August.

http://www.fx360.com/commentary/neal/8008/central-bank-triple-shot-and-nfp-expectations.aspx

The biggest problem in the U.S. economy is the lack of job growth.  While the unemployment rate in the U.S. has fallen from its high of 10 percent, the two most recent non-farm payrolls reports raised concerns that the U.S. economy is moving in the wrong direction.  Many countries in Europe are back in recession and if job growth does not improve, the U.S. could fall victim to the same contraction.

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By Kathy Lien, Managing Director of FX Strategy for BK Asset Management

After sitting on the sidelines for the past few months, central banks around the world decided that it was finally time to spring into action.  This morning, the Bank of England, People's of China and the European Central Bank eased monetary policy, triggering widespread volatility in the foreign exchange market. The European Central Bank's decision to cut its refinancing rate to to a record low of 0.75% stripped the EUR/USD of all its EU Summit gains even though ECB President Draghi refused to comment on the possibility of LTRO3.  While the decision was largely anticipated, it was nonetheless significant enough to drive the EUR/USD sharply lower.  In our ECB Preview, we wrote that a rate cut by the ECB could be a win-win for the EUR and this could still be true once the dust settles and investors realize that the ECB has finally stepped out of the shadows and taken steps to actively stimulate the Eurozone economy.  However this may take a few days and will only happen if equity traders respond positively to the global easing.  Interestingly enough, Dow futures are trading lower this morning, which could be a result of Draghi's extreme pessimism

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