- EUR/USD is expected to decline as the US dollar sees a rebound.
- A disappointing US employment report has led to market speculation about two potential interest rate cuts by the Federal Reserve.
- The euro might remain stable due to the European Central Bank’s (ECB) potential slowdown in rate cuts.
The EUR/USD is likely to weaken after trading around 1.1560 during Monday’s Asian session, following a gain of about 1.5% in the previous day. The pair is losing value as the US dollar recovers from its earlier losses.
However, the dollar faces challenges due to worse-than-anticipated employment data released on Friday, which has led the market to respond with expectations of two interest rate cuts from the Federal Reserve. Currently, traders are anticipating a total cut of 63 basis points (BPS) by year-end, with the first cut projected for Thursday.
The US non-farm payrolls (NFP) reported an increase of 73,000 jobs, significantly lower than the previously expected rise of 110,000 and a drop from June’s revised figure of 147,000. Additionally, the unemployment rate in July rose to 4.2%, up from 4.1% in June, as expected.
The downside for the EUR/USD pair might be cushioned, as the euro is anticipated to stabilize while the ECB appears set to slow down its rate cuts. This positioning is likely due to inflation forecasted to surpass the ECB’s short-term expectations.
Recent statistics indicate that consumer inflation in the eurozone held steady at 2.0% in July, slightly above the market’s predictions of 1.9%. Furthermore, investors are also considering the effects of newly introduced US tariffs on EU exports.
