Daily Forex News By XtreamForex

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USD/CAD Holds Near Five-Month Lows as BoC–Fed Policy Gap Lifts Loonie

Forex markets were closed on December 25, and the USD/CAD ratio hardly changed from its five-month low on December 24. Markets were quiet due to holiday trading, and by December 25, when most major exchanges were closed, the pair was at its lowest level since late July, hovering around 1.3675. Due to differing interest rate outlooks between the two nations, the Canadian dollar managed to slightly increase while the US dollar remained stable overall.

Light Activity Pins USD/CAD in Place

Most traders checked out for the holidays, so market activity was sparse. Nobody expected big moves in USD/CAD, even with mixed economic data on the table. Canada’s GDP slipped 0.3% in October, perfectly matching forecasts and erasing September’s small gain. Meanwhile, the US economy flexed, with Q3 GDP jumping to an annualised 4.3%. That beat both previous estimates and market expectations. Still, with so few players around, none of this really moved the needle.

BoC’s Steady Hand Keeps Loonie Supported

The policy gap between the Bank of Canada and the U.S. Federal Reserve remains supportive of the Canadian dollar. BoC held rates at 2.25% last month with the removal of the downward bias in favour of maintaining a target range for inflation. This was because the Bank of Canada had already slashed 100 basis points in interest rates earlier this year and markets read this as the end of the cycle. The majority of experts are predicting interest rates of 2.25% to stand ever-proud through until 2026, with a slim chance of an increase towards the end of that year.

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The Australian Dollar Near a 14-month High as the RBA Maintains Its Hawkish Tone

The Australian Dollar kept its gains and momentum against the U.S. Dollar on Monday, hitting a 14-month high at 0.6727. Following the release of the Reserve Bank of Australia’s minutes from its December meeting, this rally began. The message was very clear: if inflation doesn’t decline, the RBA is prepared to raise rates once more because they don’t think the current rates are doing enough to control it.

Inflation is still running hot in Australia. In October 2025, headline inflation bumped up to 3.8%, a jump from 3.6% the month before and still above the RBA’s 2–3% comfort zone. That’s got analysts betting on another rate hike as soon as February 2026, with big banks like Commonwealth Bank of Australia and NAB calling for rates to rise to 3.85%. Meanwhile, consumer inflation expectations are climbing, too—hitting 4.7% in December. That only adds fuel to the RBA’s hawkish fire.

China News and Regional Tensions Grab Attention

On top of that, the Australian Dollar is getting a boost from headlines out of China. Australia’s economic fortunes are tightly linked to Chinese trade, so whenever Beijing signals more investment—like this week’s news about a push for advanced manufacturing and innovation—it gives the AUD extra momentum. But it’s not all smooth sailing. Tensions in the South China Sea have certainly escalated since China began its military drills, dubbed ‘Justice Mission 2025,’ off the coast of Taiwan. Actions like these underline Asia’s shipping and trade routes, and may lead to currency swings globally.

US Dollar Waits for Fed Clarity

Shifting focus to US data, Dollar Index is holding steady near 98.10. Traders are in a holding pattern as they wait for the Federal Reserve’s December meeting minutes to get a sense of what policy will be like through 2026. The Fed lowered rates by 25 basis points just last month, and the market is still pricing in two more cuts next year.

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EUR/USD Pair Technical Analysis: Stuck Below 1.1800

The EUR/USD pair does not seem to go above the level of 1.1800 and on early Wednesday in Asia, it sank to a new weekly low near 1.1740 as the US Dollar caught some strength. What’s odd is that this happened even though the FOMC Minutes still point to more rate cuts ahead. Right now, the pair is hovering around 1.1760, a touch below where it started the day.

EUR/USD Currency Pair Short-Term Overview: Bears in Control

The 4-hour chart shows that sellers are leading. The EUR/USD rate, on the other hand, trades above this moving average, which is viewed as a resistance between 1.1775 and 1.1780 at the moment (it’s the SMAs just above them in response). Momentum looks bearish but is still moving into negative, and PRICE ACTION remains in range without any break of the 100- or 200-period SMAs at this moment, which are located at 1.1727 AND 1.1658, respectively. The RSI is sticking to the mid-40s, while the momentum indicator continues heading south of its midline. Or, in a word, buyers are frozen. A further drop towards long-term support may occur if the pair breaks below the 100-period SMA.

Daily Chart Shows Less Grim Picture

On a higher daily chart, you see the situation is much less grim. In EUR/USD, the pair continues to trade above all of our major averages. Provided the dynamic support by the 20-day SMA is still in place and is now being located around the zone of 1.1720-1.1725. The 200-day still trends upward, but the 100-day has flattened a tad and may indicate some pause time.. There is still an increase. Momentum readings remain above their midlines even as they cool somewhat. RSI has fallen from recent highs to around 62. Bulls have been humbled, as they’re no longer quite so dominant — the bulls and their power dynamic keep this expectation in check.

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EUR/JPY pair sticks close to 183.50 as the euro hangs in there


The EUR/JPY pair nudged a bit higher in Asian trading on Tuesday, staying right around 183.50 after slipping for two days. The euro’s getting a little help from steadier market nerves—tensions between the US and Venezuela cooled off, and that’s taken some pressure off riskier currencies like the euro. Traders feel more relaxed now, but they’re still careful. That’s helped the euro steady up against the yen.

Now, everyone’s watching Europe’s upcoming economic numbers. In the day ahead, attention will turn on Germany and the release of its latest inflation data for December, which includes the CPI and HICP. These figures are important. They contribute to setting the tone for potential future interest rate actions by the European Central Bank.

All eyes on German inflation

As stated, the focus will be on Germany, as it is the dominant force in the Eurozone. Most people believe interest rates won’t drop anytime soon and will rise if inflation continues to decline. The ECB left rates unchanged in December 2025 and gave no hints about rushing into anything new. President Christine Lagarde basically said things are too uncertain to make any promises about what comes next.

Along with inflation data, traders are keeping tabs on PMI reports from Germany and the Eurozone. These business activity numbers give an early read on the economy and how much demand is out there.

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EUR/GBP rebounds toward 0.8680 as markets look past softer Eurozone inflation

The EUR/GBP pair trims its early losses and edges higher toward the 0.8680 mark during late Asian trading on Thursday. The modest rebound comes as investors largely shrug off weaker-than-expected preliminary Eurozone inflation figures for December.

Data released by Eurostat on Wednesday showed headline Harmonized Index of Consumer Prices (HICP) rising 2.0% year over year, in line with forecasts but slightly below November’s 2.1%. Core HICP—which excludes volatile components such as food, energy, alcohol, and tobacco—slowed to 2.3%, missing expectations and easing from the previous 2.4%.

On a monthly basis, both headline and core inflation rebounded, increasing by 0.2% and 0.3% respectively, after posting declines in November.

Despite the softer inflation print, the figures are not expected to significantly alter market expectations for near-term interest rate cuts from the European Central Bank, as inflation remains close to the ECB’s 2% target.

Later in the session, attention will turn to remarks from ECB Vice President Luis de Guindos, who is scheduled to speak at a fireside chat during Vicente’s second edition of Next Spain Global at 08:30 GMT.

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USD/CAD holds near 1.3900 as solid US data underpins Fed pause outlook

USD/CAD remains modestly higher for a third consecutive session, trading close to the 1.3890 level during early Asian trading on Thursday. The pair continues to find support from a firmer US Dollar (USD), backed by stronger-than-expected US economic data. Market participants now turn their attention to the weekly US Initial Jobless Claims release later in the day, along with comments from Federal Reserve officials.

On Wednesday, the US Census Bureau reported that Retail Sales rose by 0.6% in November to $735.9 billion, rebounding from a 0.1% decline in October and surpassing market expectations of a 0.4% increase. In addition, November’s Producer Price Index (PPI) surprised to the upside, with both headline and core inflation accelerating to 3% year-over-year.

Combined with last week’s data showing the US Unemployment Rate easing to 4.4% in December, these figures strengthen the argument for the Federal Reserve to keep interest rates unchanged in the near term, providing ongoing support to the USD. Reflecting this shift, Morgan Stanley analysts have pushed back their expectations for rate cuts to June and September, from earlier projections of January and April, following the latest US jobs report.

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GBP/JPY rises toward 212.40 ahead of key UK jobs data

The GBP/JPY pair trades slightly higher around 212.45 during the Asian session on Tuesday, supported by broad weakness in the Japanese Yen (JPY). The Yen came under pressure after Japan’s Prime Minister, Sanae Takaichi, announced plans for a snap general election on Monday.

PM Takaichi confirmed that the lower house of parliament will be dissolved on January 23, with elections scheduled for February 8. On the fiscal front, she pledged to move away from what she described as “excessively tight fiscal policy,” including a proposal to suspend the consumption tax for two years.

These policy signals are viewed as inflationary for Japan’s economy and could reinforce expectations for further interest rate increases by the Bank of Japan (BoJ). The central bank is set to deliver its first monetary policy decision of the year on Friday and is widely expected to keep rates unchanged at 0.75%, while maintaining a hawkish bias toward future tightening.

Meanwhile, the Pound Sterling (GBP) is posting modest gains against the Yen but remains broadly subdued ahead of the United Kingdom’s employment data for the three months ending in November. Market forecasts suggest the ILO unemployment rate eased to 5.0% from 5.1% in the prior period, marking a slight improvement from its highest level since October 2021.

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UK CPI forecast to tick higher in December, curbing expectations of BoE rate cuts

The UK Office for National Statistics (ONS) is set to publish the December Consumer Price Index (CPI) data on Wednesday at 07:00 GMT, a release closely watched by financial markets. Economists anticipate a mild pickup in inflation, suggesting price pressures may be regaining momentum.

Inflation remains a key input for the Bank of England (BoE) and a major driver of movements in the British Pound (GBP). With the next Monetary Policy Committee (MPC) meeting scheduled for February 5, markets largely expect policymakers to keep the Bank Rate unchanged at 3.75%. However, this week’s inflation data is likely to influence expectations around the future policy path.

What to expect from the December UK inflation data
Headline CPI is forecast to rise to 3.3% year-on-year in December, slightly above November’s 3.2%. On a monthly basis, consumer prices are expected to rebound by 0.4%, reversing the 0.2% contraction seen in the prior month.

Core CPI—which excludes volatile food and energy prices and is more closely monitored by the BoE—is expected to remain steady at 3.2% annually. Month-on-month, core inflation is projected to increase by 0.3%, following a 0.2% decline in November.

Potential impact on GBP/USD

At its December meeting, the BoE’s MPC voted narrowly (5–4) to cut the policy rate by 25 basis points to 3.75%, marking the fourth rate reduction of 2025. While policymakers acknowledged easing inflationary pressures and early signs of labour market cooling, they emphasized that any further easing would proceed cautiously.

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EUR/USD Price Forecast: Probes 1.1700 resistance after EMA bounce

EUR/USD ticks higher after posting mild losses in the prior session, hovering near the 1.1700 mark during early Asian trade on Thursday. From a technical standpoint, the daily chart still shows the pair trading within a descending channel, pointing to a prevailing bearish undertone.

The pair is holding marginally above the 50-day Exponential Moving Average (EMA), while the nine-day EMA has stabilised following recent weakness. The flattening of the medium-term average suggests consolidation rather than a renewed directional move. With the faster EMA still positioned below the 50-day, buyers require stronger follow-through to build upside momentum.

Momentum indicators offer cautious support. The 14-day Relative Strength Index (RSI) sits near 52 and is edging higher, reflecting a neutral but improving bias. A continued rise in the RSI would help validate any upside breakout, whereas a stall around the midpoint could keep prices confined to a range.

On the downside, a move back below the 50-day EMA at 1.1674 and the nine-day EMA at 1.1672 would shift focus toward the seven-week low at 1.1589, last seen on December 1, ahead of the lower boundary of the descending channel near 1.1570.

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Japanese Yen hovers near one-week low against USD ahead of BoJ press conference


The Japanese Yen (JPY) remains under pressure near its weekly low versus the US Dollar following the Bank of Japan’s (BoJ) widely anticipated decision to keep short-term interest rates unchanged. Market participants remain cautious, refraining from fresh directional bets as they await guidance on the timing of any further policy tightening. In this context, comments from BoJ Governor Kazuo Ueda during the post-meeting press conference are expected to play a decisive role in shaping near-term JPY price action.

Meanwhile, domestic political uncertainty, concerns over Japan’s fiscal position, and an overall risk-positive market environment continue to weigh on the safe-haven Yen. A modest rebound in the US Dollar has also provided support to the USD/JPY pair. However, persistent speculation that Japanese authorities could step in to curb excessive currency weakness is prompting traders to remain cautious before positioning for further downside in the Yen.

Japanese Yen maintains bearish tone amid political and fiscal concerns

As widely expected, the Bank of Japan concluded its two-day policy meeting on Friday by maintaining the short-term interest rate at 0.75%. Attention now turns to Governor Ueda’s press briefing, which could offer fresh clues on the future policy path and influence the near-term direction of both the JPY and USD/JPY.

Earlier data showed that Japan’s National Consumer Price Index (CPI) eased to 2.1% year-on-year in December from 2.9% previously. Core CPI, which excludes fresh food, slowed to 2.4% from 3.0% in November. Meanwhile, CPI excluding both fresh food and energy dipped slightly to 2.9% from 3.0%, though it remains comfortably above the BoJ’s 2% target.

These inflation readings continue to support expectations that the BoJ may pursue further policy normalization. Adding to the optimism, a private-sector survey revealed that Japan’s manufacturing activity expanded in January for the first time in seven months. The S&P Global flash manufacturing PMI climbed to 51.5—its highest level since August 2024—while the services PMI improved to 52.8 from 51.1.

On the political front, Prime Minister Sanae Takaichi is set to dissolve parliament ahead of a snap election scheduled for February 8, aiming to secure a stronger mandate to advance fiscally expansionary reforms. However, investor confidence has been shaken by her proposal to temporarily cut the 8% food consumption tax, triggering a sharp sell-off in government bonds and adding further pressure on the Yen.

At the same time, easing geopolitical tensions—following US President Donald Trump’s announcement of a potential NATO-related deal involving Greenland—have reduced demand for traditional safe-haven assets, further undermining the JPY.

In contrast, expectations of a more hawkish BoJ stance stand in sharp divergence with growing market conviction that the US Federal Reserve will cut interest rates at least twice this year. Additionally, broader de-dollarization trends have offset strong US economic data, pulling the US Dollar back toward a two-week low and potentially limiting further upside in USD/JPY.

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EUR/USD Price Forecast: Pair climbs toward four-year high near 1.1920


The EUR/USD pair advances around 0.36%, trading close to the 1.1900 level during Monday’s Asian session. The pair gains strength as the US Dollar continues to weaken, extending last week’s losses ahead of the Federal Reserve’s monetary policy decision scheduled for Wednesday.

At the time of writing, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is down nearly 0.4% around the 97.00 mark, its lowest level in four months.

The US Dollar remains under strong selling pressure as investors stay concerned about the United States’ long-term trade relationships with key partners. These worries persist even after recent geopolitical frictions and trade tensions between Washington and several European Union members have eased.

Market expectations suggest the Federal Reserve will keep interest rates unchanged within the 3.50%–3.75% range on Wednesday, according to the CME Fed Watch tool. This would mark the Fed’s first pause following three consecutive rate cuts. The central bank lowered rates by a total of 75 basis points in late 2025 to support a weakening labor market.

Looking ahead, the Euro’s direction this week will largely depend on the release of preliminary Q4 Eurozone Gross Domestic Product (GDP) data and Germany’s Harmonized Index of Consumer Prices (HICP) figures for January.

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Japanese Yen eases from near three-month peak against USD; upside outlook remains intact

The Japanese Yen (JPY) trades modestly lower during the Asian session on Tuesday, snapping a two-day winning streak and pulling back from its strongest level since November 2025 against the US Dollar. The pullback comes as investors grow increasingly uneasy about Japan’s fiscal position following Prime Minister Sanae Takaichi’s expansive spending and proposed tax-cut measures. A generally positive risk mood further weighs on the safe-haven JPY, while domestic political uncertainty persists ahead of the snap election scheduled for February 8.

That said, downside momentum in the Yen appears limited. Speculation that Japanese authorities could step in to curb excessive currency weakness continues to deter aggressive bearish positioning, especially as the Bank of Japan (BoJ) maintains a hawkish policy bias. Meanwhile, the US Dollar remains pinned near a four-month low amid expectations that the Federal Reserve will deliver two additional rate cuts this year. This divergence keeps a lid on any meaningful USD/JPY recovery, with traders awaiting direction from the highly anticipated two-day FOMC meeting that begins later today.

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EUR/USD slips below 1.2000 as US Dollar rebounds, focus shifts to Fed decision


The EUR/USD pair moves lower toward the 1.1990 region during the early European session on Wednesday, ending a four-day winning streak. The pullback comes after the pair retreated from a fresh five-year high, driven by a modest rebound in the US Dollar (USD). Market attention now turns firmly to the US Federal Reserve’s interest rate decision later in the day.

On Tuesday, US President Donald Trump stated that he would soon announce his choice for the next Federal Reserve Chair, adding that interest rates would decline under the new leadership. These remarks have raised concerns among investors about the Fed’s independence if a Trump-backed candidate is appointed. Such uncertainty could limit upside potential for the USD and offer underlying support to EUR/USD.

Investors widely expect the Federal Reserve to keep interest rates unchanged within the 3.50%–3.75% range. However, traders will closely analyze the accompanying statement and press conference for signals on the timing and pace of potential rate cuts.

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Japanese Yen remains under pressure after weak Tokyo CPI; USD/JPY rises toward 154.00

The Japanese Yen (JPY) continues to trade on the back foot during Friday’s Asian session. Modest US Dollar (USD) buying, combined with lingering yen weakness, keeps the USD/JPY pair supported near the 154.00 level. Softer Tokyo inflation data has cooled expectations for an early interest rate hike by the Bank of Japan (BoJ). At the same time, concerns over Japan’s fiscal position—amid Prime Minister Sanae Takaichi’s reflation-focused policies—and political uncertainty ahead of the February 8 snap election are weighing further on the JPY.

That said, speculation about potential coordinated intervention by US and Japanese authorities to support the yen may deter traders from taking aggressive bearish positions. In addition, global trade tensions sparked by US President Donald Trump’s tariff threats, along with broader geopolitical risks, could help limit downside for the safe-haven JPY. Meanwhile, the USD lacks strong upside momentum due to lingering concerns over Federal Reserve independence and expectations of lower US interest rates, warranting caution before betting on sustained USD/JPY gains.

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Japanese Yen Holds Firm Against USD as Intervention Talk Counters Fiscal Worries

The Japanese Yen (JPY) maintains a modest upside bias against a slightly weaker US Dollar (USD) during Tuesday’s Asian session, supported by renewed speculation over possible joint currency intervention by Japan and the United States. Comments from Japan’s Finance Minister Satsuki Katayama reignited such concerns, while expectations of a more hawkish Bank of Japan (BoJ) further underpin the JPY. As a result, USD/JPY has retreated from the more-than-one-week high posted on Monday.

That said, the Yen’s upside remains limited amid domestic political uncertainty ahead of the February 8 snap election and lingering fiscal concerns linked to Prime Minister Sanae Takaichi’s reflationary agenda. In addition, a generally positive tone in global equity markets weighs on demand for the safe-haven JPY. Meanwhile, the nomination of Kevin Warsh as the next Federal Reserve Chair provides support to the USD, helping cap deeper losses in the USD/JPY pair.

Katayama’s remarks revive intervention concerns, supporting the Yen

Finance Minister Satsuki Katayama stated on Tuesday that Japan will continue to closely coordinate with US authorities when necessary, in line with a joint statement issued by both countries last September, and will respond appropriately to currency moves.

She also defended Prime Minister Takaichi’s earlier comments highlighting the broader economic benefits of a weaker Yen, clarifying that the remarks were made in general terms rather than as a policy signal.

Meanwhile, the Summary of Opinions from the BoJ’s January meeting revealed that policymakers discussed growing inflationary pressures stemming from Yen weakness, reflecting a relatively hawkish tone among board members.

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EUR/USD edges higher above 1.1800 ahead of Eurozone inflation data

The EUR/USD pair trades modestly higher around 1.1830 during early European trading on Wednesday. However, upside momentum may remain capped as investors stay cautious following the swift resolution of a partial US government shutdown. Market attention later in the session will turn to the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) data, which could influence near-term price action.

According to reports, US President Donald Trump signed legislation on Tuesday to end the partial government shutdown that began over the weekend. The bill narrowly passed the House of Representatives with a 217–214 vote. This development, combined with Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair, may lend support to the US Dollar by easing concerns surrounding fiscal uncertainty and central bank independence.

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EUR/GBP edges higher near 0.8650 ahead of BoE and ECB policy decisions

The EUR/GBP pair trades modestly higher around the 0.8650 level during the late Asian session on Thursday. The uptick comes as the Pound Sterling underperforms, with traders remaining cautious ahead of the Bank of England’s (BoE) monetary policy announcement scheduled for 12:00 GMT.

The BoE is widely expected to keep interest rates unchanged at 3.75% following a rate cut at its previous meeting. Policymakers had earlier signaled that monetary policy would continue on a “gradual downward path.” As a result, market participants will closely analyze the policy statement and Governor Andrew Bailey’s press conference for clearer guidance on the future interest rate outlook.

The UK central bank is likely to maintain its stance on gradual easing, citing subdued labor market conditions and expectations that inflation will return to the 2% target in the second quarter of this year. However, recent data showed that Consumer Price Index (CPI) inflation picked up in December after easing in October and November, adding a layer of uncertainty to the outlook.

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Australian Dollar stays under pressure amid cautious market mood

The Australian Dollar (AUD) extended its losses against the US Dollar (USD) for a third consecutive session on Friday, as broad risk aversion weighed on global markets. The risk-sensitive, commodity-linked AUD came under selling pressure after a sharp decline in global equities, driven largely by a tech-led sell-off and renewed concerns over heavy investment in artificial intelligence, which dented overall investor confidence.

Adding to the downside, Reserve Bank of Australia (RBA) Governor Michele Bullock stated that the central bank lifted the Official Cash Rate (OCR) because the economy is more capacity-constrained than previously assessed, requiring tighter monetary policy. Bullock emphasized that demand growth must be restrained unless supply capacity improves at a faster pace.

Meanwhile, Australia’s Trade Balance data released on Thursday showed that the trade surplus widened to AUD 3,373 million in December 2025, up from a downwardly revised AUD 2,597 million in November and slightly above market expectations of AUD 3,300 million. Exports rose 1.0% month-on-month (MoM), recovering from an upwardly revised 4.0% fall in November, supported mainly by metal ores and minerals. Imports declined by 0.8% MoM, a sharper drop than the revised 0.2% contraction previously recorded, largely due to weaker demand for other merchandise goods.

Earlier this week, the RBA raised the OCR by 25 basis points to 3.85%, citing stronger-than-expected economic growth and persistently high inflation. As the tightening cycle continues, markets now assign an 80% probability to another rate hike in May and are pricing in around 40 basis points of additional tightening over the remainder of the year.

US Dollar eases after recent gains

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, edged lower after two straight sessions of gains and was hovering near the 97.90 level at the time of writing.

Market participants are awaiting the preliminary February reading of the Michigan Consumer Sentiment Index, scheduled for release later in the North American session.

The US Dollar softened as recent labor market data pointed to easing employment conditions, reinforcing expectations that the Federal Reserve may adopt a more dovish stance. Markets are currently pricing in two interest-rate cuts this year, with the first potentially beginning in June, followed by another in September.

According to the CME FedWatch Tool, there is nearly a 77.3% probability that the Federal Reserve will keep interest rates unchanged at its March policy meeting, with expectations building for an initial rate cut in June.

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EUR/USD moves higher above 1.1900 ahead of US January NFP report

The EUR/USD pair advances toward 1.1915 in early European trading on Wednesday, supported by a softer US Dollar. Investors are likely to adopt a cautious stance later in the session as they await the delayed US January employment report, which could shape expectations around Federal Reserve policy.

Disappointing US Retail Sales figures weighed on the Greenback and provided support to the pair. According to data released by the US Census Bureau on Tuesday, Retail Sales were flat at $735 billion in December, following a 0.6% increase in November. The result fell short of market expectations for a 0.4% rise. On an annual basis, Retail Sales grew by 2.4% in December, down from 3.3% previously.

Cleveland Fed President Beth Hammack stated that interest rates may remain unchanged for an extended period as policymakers assess incoming data. Dallas Fed President Lorie Logan added that while inflation is expected to ease further, she would require clear signs of significant weakness in the labor market before backing additional rate cuts.

Economists forecast that US Nonfarm Payrolls increased by 70,000 in January, with the Unemployment Rate seen holding steady at 4.4%. Stronger-than-expected labor market data could lend fresh support to the US Dollar against the euro in the near term.

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EUR/USD weakens as US jobs data trims Fed rate cut bets

The EUR/USD pair trades in negative territory for the third consecutive day near 1.1860 during the early European session on Thursday. Traders will keep an eye on the US weekly Initial Jobless Claims data. On Friday, the attention will shift to the US Consumer Price Index (CPI) inflation report.

The Greenback strengthens against the Euro (EUR) as traders trim bets for a March Federal Reserve (Fed) rate cut after the upbeat US jobs data. The Bureau of Labor Statistics revealed on Wednesday that the US Nonfarm Payrolls (NFP) climbed by 130,000 in January, stronger than the expectation of 70,000. The Unemployment Rate fell to 4.3% in January from 4.4% in December, better than the projection of 4.4%.

According to the CME Fed Watch tool, financial markets are now pricing in nearly a 94% probability that the Fed will leave rates unchanged at its next meeting, up from 80% from the previous day.

Across the pond, the growing acceptance that the European Central Bank (ECB) would likely hold interest rates steady for the rest of the year could support the shared currency. ECB President Christine Lagarde said during the press conference that the central bank would maintain its data-dependent and “meeting-by-meeting approach” and would not be “recommitting to a particular rate path.

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