EUR/USD Drops On Fed’s Chances Of Keeping Rates Steady
EUR/USD remains weak for the fifth straight session, holding its position around 1.0240 during the Asian trading hours. The pair faces challenges as the US Dollar (USD) strengthens following stronger-than-expected jobs growth in the United States (US) for December.
Data from the US Bureau of Labor Statistics (BLS), released on Friday, reported that Nonfarm Payrolls (NFP) increased by 256K in December, significantly surpassing market expectations of 160K and surpassing November’s revised reading of 212K (previously reported at 227K).
Additionally, the Unemployment Rate edged down to 4.1% in December from 4.2% in November. However, annual wage inflation, as measured by the change in Average Hourly Earnings, eased slightly to 3.9% from 4% in the previous reading.
Strong US labor market data for December is likely to strengthen the US Federal Reserve’s (Fed) stance to keep interest rates unchanged in January, which will support the greenback against other currencies. According to the CME FedWatch Tool, financial markets are anticipating that the Fed will keep its benchmark interest rate in the range of 4.25%-4.50% during its meeting on January 28-29.
Additionally, the Euro (EUR) is facing headwinds as traders anticipate four rate cuts by the European Central Bank (ECB), which is expected to happen at each meeting this summer. ECB policymakers appear comfortable with these dovish expectations, as inflationary pressures in the Eurozone remain largely contained.
On Wednesday, ECB policymaker and Bank of France Governor François Villeroy noted that although price pressures are projected to pick up slightly in December, interest rates will continue to rise towards the neutral rate “without a slowdown in the summer,” provided that upcoming data confirm that “the decline in price pressures does not continue.”(AL)
Source: Fxstreet
