Strong NFP Pressures Euro, Focus Shifts to CPI
The EUR/USD pair weakened for the third consecutive day, hovering around the 1.1860 area at the start of Thursday's European session. The US dollar received a boost after solid US labor data prompted market participants to refrain from aggressively pricing in a Federal Reserve interest rate cut.
The main trigger came from the January Nonfarm Payrolls (NFP) report, which showed 130,000 jobs added, while the unemployment rate fell to 4.3%. This combination signals a relatively resilient labor market, narrowing the scope for the Fed to quickly cut interest rates.
Consequently, expectations for an imminent interest rate cut have also retreated. Some market participants see a growing chance of the Fed holding rates at its next meeting—followed by an increased probability of a "no change" in FedWatch.
From the European perspective, the euro still has support from the ECB's cautious and data-dependent stance, but this support is not enough to stem short-term dollar pressure. As a result, EUR/USD movements are largely determined by the direction of the dollar and US yields.
The next market-anticipated agenda items are Initial Jobless Claims and the release of US inflation (CPI) on Friday. If CPI rebounds, the dollar could strengthen further, and EUR/USD could remain under pressure. Conversely, if inflation declines, the market could reopen the easing narrative, giving the euro a chance to breathe again. (asd)
Source: Newsmaker.id
