EUR/USD could rise as the US Dollar weakens due to expected interest rate cuts from the Federal Reserve. In June, the US ADP Employment Change fell by 33,000, reversing the 29,000 increase seen in May. The EUR/USD pair is trading around 1.1800 during the Asian session on Thursday. This trend is influenced by expectations of Fed action following disappointing US employment figures, which missed the 95,000 forecast.

Upcoming Economic Indicators

Later today, we look forward to key economic indicators, including US Nonfarm Payrolls and Average Hourly Earnings. The ISM Services PMI and S&P Global US PMI reports are also anticipated on Thursday. Voices from the Eurozone, such as ECB’s Pierre Wunsch, express confidence in current interest rate projections. ECB member Olli Rehn suggests that joint European borrowing could strengthen the Euro by creating a new safe asset. The Euro is the currency used by 19 EU countries and is the second most traded currency worldwide. The European Central Bank, located in Frankfurt, manages the Eurozone’s monetary policies, focusing on price stability and interest rate adjustments. The value of the Euro is impacted by inflation, economic indicators, and trade balance, all of which provide insight into the economy’s health and influence foreign investment. Recent developments have increased pressure on the euro, mainly due to disappointing US economic data and changing market expectations for rates. The significant drop in the ADP Employment Change — down 33,000 in June — erased May’s gain of 29,000. This divergence from the analyst expectation of around 95,000 suggests the US labor market may be cooling. This jobs data, viewed alongside predictions for future Fed actions, indicates a greater chance of interest rate cuts. This sentiment is already reflected in pricing across rate-sensitive assets. As the EUR/USD pair remains near 1.1800, the euro is buoyed by speculation of reduced rate support for the dollar in the near future.

Market Expectations and Movements

We expect to gain further clarity after the Nonfarm Payrolls and Average Hourly Earnings are released later this week. If job creation slows or wage growth decreases, it may confirm recent expectations and support ongoing yield curve trends. Additionally, sentiment in the service sector, as indicated by ISM and S&P Global PMI data, could influence short-term price movements, depending on how resilient US demand appears. Weak results could raise broader economic concerns, further benefiting the euro if markets anticipate earlier Fed action. Meanwhile, across the Atlantic, the Fed’s tone remains steady. Wunsch’s recent comments conveyed confidence in the current policies, showing no urgent need for changes. Rehn has suggested a discussion about pan-European borrowing, which may lead to a common Eurozone safe asset that could reshape longer-term investment flows and enhance the euro’s reliability. These initiatives could attract more foreign investment in euro-denominated assets, indirectly strengthening the euro and altering risk dynamics. Although benefits might not be immediate, they could influence hedging or positioning frameworks over time. Given the euro’s direction is closely tied to inflation and overall economic health, we’ll pay close attention to upcoming regional indicators. Indicators on price pressures and trade movements can impact rate expectations in Frankfurt and, depending on alignment, guide medium-term contracts. Currently, the main drivers are the differences in central bank strategies. Slower US economic momentum has reduced the rate gap with Europe, making euro exposure more attractive. This trend might continue if payroll and consumption measures keep weakening. It’s important to monitor how quickly these adjustments are absorbed in FX and rates, especially given the rapid nature of recent changes. Expect increased volatility around key releases, and adjust spreads and option pricing as needed. Currently, the behavior of the pair near the 1.1800 level suggests balance, but without surprises from the US, we may see renewed support. We’re staying responsive rather than making preemptive moves, given the slim margin between economic signals and positioning shifts. Create your live VT Markets account and start trading now.

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