The EUR/USD currency pair has hit its highest level since late September, driven by pressure on the US Dollar from delayed US jobs data. The labor market in the US shows slower hiring, with unemployment rising to 4.6%, a four-year high that exceeded the expected 4.4%. Nonfarm Payrolls rose by 64,000 in November, slightly above forecasts, while October’s numbers were revised down. Wage growth was modest at 0.1%, falling short of the 0.3% forecast. Retail sales remained flat, missing the predicted 0.1% increase. However, retail sales excluding autos rose by 0.4%, and the Control Group saw a 0.8% increase, resulting in a mixed economic picture.

US Dollar Index and Fed Expectations

The US Dollar Index is stable around 97.96, marking its lowest point since early October. Preliminary PMI results for December show a drop in business activity, with the Composite PMI falling to 53.0. The Fed is expected to keep interest rates steady at its next meeting, even after cutting rates earlier this year. There is ongoing caution regarding future policy changes amid weaker economic indicators. The US Dollar is under pressure due to soft jobs and business activity data, indicating this trend may continue in the coming weeks. The EUR/USD pair breaking to a three-month high of 1.1800 is a significant sign. This dollar weakness stems from a cooling US economy. The latest Nonfarm Payrolls report revealed the unemployment rate surged to 4.6%, a level not seen since the post-pandemic recovery in 2021. Coupled with slow wage growth and declining PMI numbers, this reinforces the Federal Reserve’s careful approach after cutting rates by 75 basis points throughout 2025. The market anticipates more policy easing next year.

Euro Expected to Gain as ECB Maintains Stance

For the EUR/USD pair, buying call options is worth considering to benefit from further gains. Recent CFTC data (week ending December 9th) shows a significant rise in net-long Euro positions by large speculators, indicating strong momentum. In the options market, the one-month risk reversal for EUR/USD has turned positive at 0.15, signaling greater demand for bets on price increases than on declines. This weakness of the dollar comes at a time when the European Central Bank is not eager to cut rates. Recent inflation data from the Eurozone showed core CPI for November steady at 3.1%, giving ECB officials a reason to maintain their current stance. This difference in policy between a dovish Fed and a more neutral ECB supports the EUR/USD rally. Looking beyond currencies, expectations of two Fed rate cuts in 2026 suggest we should explore interest rate derivatives like SOFR futures to prepare for lower rates. The softening dollar also presents a good opportunity to evaluate long positions in dollar-denominated assets, such as gold. While we need to be ready for short-term fluctuations, the overall trend appears to be set. Create your live VT Markets account and start trading now.

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