EUR/USD may further appreciate as the US Dollar could face challenges with a September Fed rate cut becoming increasingly likely.
CME FedWatch tool indicates a pricing in 92% of a 25-basis-point Fed rate cut in September, following August jobs data.
The European Central Bank is widely expected to keep rates unchanged at Thursday’s policy meeting.
EUR/USD inches lower after registering more than 0.5% gains in the previous session, trading around 1.1710 during the Asian hours on Monday. The pair depreciates as the US Dollar (USD) recovers its recent losses, after weaker-than-expected August jobs data heightened concerns over a slowing economy and reinforced expectations of United States (US) Federal Reserve (Fed) rate cuts.
US Bureau of Labor Statistics (BLS) reported on Friday that the US Nonfarm Payrolls (NFP) rose by 22,000 in August, falling short of the market expectations of 75,000. This figure followed the 79,000 increase (revised from 73,000) recorded in July. Meanwhile, the Unemployment Rate increased to 4.3% August, as expected, against the 4.2% prior. Average Hourly Earnings increased 0.3% MoM in August, in line with expectations.
The CME FedWatch tool indicates a pricing in 92% of a 25-basis-point (bps) rate cut by the Fed at the September policy meeting, up from 86% a week ago, with bets rising on a potential 50 bps reduction this month.
Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee said in an interview on Bloomberg TV on Friday that he is still unsure whether September is the right time for an interest rate cut, following weaker jobs data. He added that high inflation data is still cause for concern, and key Fed officials may not be fully sold on a September rate cut.
In the Eurozone, the focus now shifts to the European Central Bank (ECB) meeting due on Thursday, where markets broadly expect policymakers to keep rates unchanged for the second consecutive meeting, supported by steady growth and inflation hovering near the target.
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