- The EUR/USD pair is likely to decline as the US dollar strengthens with a steady outlook from the Federal Reserve.
- The US Central Bank has signaled that it won’t expedite interest rate cuts anytime soon.
- Traders might find support for the euro, possibly halting the easing measures from the ECB.
The EUR/USD pair is, I think, continuing its downward trend, having lost ground for three straight sessions and trading around 1.1770 during Asian hours on Friday. It faces headwinds as the US dollar attracts buyers after the recent report on unemployment claims released on Thursday. Traders are also waiting for Germany’s Producer Price Index (PPI) figures for August, which will come out later today.
According to the U.S. Department of Labor, published on Thursday, new unemployment claims in the US dropped to 231,000 for the week ending September 13. This figure is notably lower than the previous week’s revised total of 264,000, which was initially reported as 263,000, and also below the estimated 240,000. Meanwhile, ongoing claims for the week ending September 6 were adjusted down by 7,000 to 1.920 million.
The strength of the US dollar remains intact after the Federal Reserve executed anticipated rate cuts on Wednesday. However, they are not in any hurry to slash borrowing costs further in the near term. Federal Reserve Chairman Jerome Powell mentioned there’s evidence of growing weakness in the labor market, which is part of the rationale behind their decision to stabilize rates after previously doing so since December, particularly due to inflation driven by tariffs.
That said, the downward pressure on the EUR/USD pair might lessen as the euro could gain support from rising expectations that the European Central Bank (ECB) is nearing the end of its rate-cutting cycle, especially in light of the latest inflation data.
ECB Vice President Luis de Guindos emphasized the need for central banks to adopt a “very sensible” approach amid high levels of uncertainty. He noted that the current rates are fitting given inflation trends and how monetary policy is being transmitted. While no immediate further cuts are anticipated, the ECB has indicated that potential future adjustments cannot be ruled out.
