- The Euro hestitates right above 1.1400 following hotter-than-expected Eurozone inflation figures.
- The Dollar consolidates gains, favoured by a risk-averse market and dwindling hopes of Fed interest-rate cuts.
- The US Nonfarm Payrolls report will provide further insight into the chances of a Fed rate cut in September.
The EUR/USD has given away previous gains to test recent lows against the US Dollar following stronger-than-expected Eurozone inflation data. The sour market mood, after US President Donald Trump signed executive orders to impose tariffs on dozens of trading partners, keeps underpinning the safe-haven US Dollar ahead of the United States (US) July Nonfarm Payrolls report.
The Euro (EUR) extended its reversal from intra-day highs at 1.1440 to retest the multi-week lows at 1.1400 after data released by Eurostat showed that Eurozone inflation grew at a steady at a 2% rate, against expectations of a slight moderation to 1.9%. In the same line, the core inflation remained steady at a 2.3% year-on-year rate, against expectations of a 2.2% reading.
These figures have added pressure to the pair, which is on track for its worst weekly performance in years as it trades about 2.7% below Monday’s highs at the moment of writing. The US Dollar, on the other hand, remains firm, on the back of a hawkish stance portrayed by the Federal Reserve’s (Fed) Chairman Jerome Powell after Wednesday’s monetary policy decision, and the hotter Personal Consumption Expenditures data released on Thursday.
In the trade front, European imports to the US will face a 15% tariff after a EU-US trade pact that has been considered fairly unfavorable for the Eurozone economy, and which has been partially responsible for the recent Euro sell-off.
Trading volumes, however, are likely to remain low, as investors await the release of the US Nonfarm Payrolls report, eager for further clues about the September Fed decision. Previous hopes of a 25 bps rate cut after the summer have been crushed by recent data, but some cooling in the labour market might force the bank to reconsider that option and trigger some USD profit-taking.
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