The EUR/USD pair began the week rather quietly, hovering in a limited range below the mid-1.1400s during the Asian session. Nevertheless, current levels are close to last Thursday’s high, which was the strongest in nearly two weeks, despite a mix of economic signals.
Tensions in the Strait of Hormuz remain elevated, as Iran aims to assert more control over this vital shipping route, even in light of a fragile interim agreement with the United States. This ongoing geopolitical strife is expected to support the safe-haven US dollar (USD), which could pose challenges for the EUR/USD pair.
On the other hand, USD bulls seem to be cautious, primarily due to diminishing expectations for a US Federal Reserve rate hike after a less-than-stellar jobs report from last week. The U.S. Nonfarm Payrolls (NFP) data revealed just 57,000 new jobs added in June, falling short of the anticipated 110,000.
Additionally, the previous month’s job figures were revised downward from 172,000 to 129,000, while the unemployment rate dipped slightly to 4.2% in June. This data not only alleviates inflation worries amidst a drop in oil prices, but also alters market expectations for one or two Fed rate hikes in 2026 down to potentially zero to one.
This situation, mixed with a generally upbeat stock market, could limit any substantial gains for the USD and, in turn, soften downward movements in EUR/USD. Meanwhile, weak inflation figures from the eurozone have led investors to temper expectations for further interest rate hikes from the European Central Bank (ECB), which could put aggressive bulls on higher alert.
Looking ahead to Monday, economic releases will include German factory orders, the Eurozone’s Centix investor confidence index, the monthly producer price index (PPI), and retail sales data. Later, in the early North American session, the US ISM service PMI will be released alongside comments from a key FOMC member, which may provide some impetus for the EUR/USD pair.
