EUR/USD Weakens Below 1.1350 On US Dollar Demand
The EUR/USD pair traded with slight losses near 1.1325 during the early Asian session on Thursday (1/5), pressured by renewed US dollar (USD) demand. The US Dollar Index (DXY) strengthened further and hit a two-day high around 99.70. Later on Thursday, the US ISM Manufacturing Purchasing Managers’ Index (PMI) report will be in focus. Most markets will be closed on May 1 due to the Labor Day holiday.
Traders have pulled back slightly from bets that the US Federal Reserve (Fed) will cut interest rates by a full percentage point this year after data showed the US economy contracted by an annualized 0.3% in the last quarter. However, futures see the Fed starting rate cuts in June, with a total of four quarter-point cuts expected, lowering rates to a range of 3.25%-3.50% by year-end.
Data released by the US Commerce Department on Thursday showed that the US economy contracted at an annualized rate of 0.3% in the first quarter (Q1) of 2025. This was lower than the expected growth of 0.4% and lower than the previous reading of 2.4%.
The report comes ahead of uncertain next steps for US President Donald Trump’s trade policy. On Wednesday, Trump said that the US economy will “take time” to show the results of current policies and blamed the stock market performance on former US President Joe Biden.
The US weekly Initial Jobless Claims are due on Thursday, followed by the final S&P Global Manufacturing PMI and ISM Manufacturing PMI. All eyes will be on the US Nonfarm Payrolls (NFP) report on Friday, which is expected to see 130,000 jobs added in the US economy in April. If the reading is weaker than expected, it could drag the greenback lower and create fresh air for EUR/USD.
Across the pond, traders are largely pricing in a 25 basis point (bps) interest rate cut by the European Central Bank (ECB) at its June policy meeting. ECB officials have forecast a further slowdown in inflation and economic growth in response to tariffs imposed by the US on its trading partners.
Source: FXStreet
