EUR/USD declines as US Dollar strengthens on Fed rate-cut outlook, weak Euro data

• EUR/USD pulls back on Thursday as the US Dollar rebounds.
• Markets scale back June Fed rate-cut bets, supporting the Greenback.
• Soft Eurozone sentiment data adds to downside pressure on the Euro.

EUR/USD eases on Thursday, trimming earlier intraday gains as a firmer US Dollar (USD) weighs on the Euro (EUR). At the time of writing, the pair is trading around 1.1794, retreating from the daily high of 1.1829.

The Greenback gains traction following stronger-than-expected weekly jobless claims data, while fading expectations of a near-term Federal Reserve (Fed) rate cut further underpin the US Dollar.

Data released on Thursday showed Initial Jobless Claims fell to 212K in the latest week, beating expectations of 215K and improving from the previous 208K.

Continuing Jobless Claims declined to 1.833 million, below the 1.86 million forecast and down from 1.864 million. Meanwhile, the four-week moving average edged up slightly to 220.25K from 219.5K.

The data points to ongoing resilience in the US labor market and reinforces the view that the Fed can afford to remain patient before lowering the borrowing cost, particularly as inflation progress remains uneven and price pressure continues to linger above the 2% target.

Markets are nearly certain that the US central bank will keep interest rates unchanged at the March and April meetings, according to the CME FedWatch Tool. Meanwhile, the probability of a 25 basis point rate cut in June has fallen to 41%, down from 48% a week ago.

The repricing of rate expectations lends support to the US Dollar, despite lingering structural headwinds tied to US trade policy uncertainty, concerns over fiscal credibility, and growing political pressure on the Fed’s independence.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 97.83 after bouncing from an intraday low of 97.49.

The Euro also comes under pressure following softer-than-expected Eurozone data released on Thursday. Consumer Confidence remained unchanged at -12.2 in February, in line with expectations.

Meanwhile, the Economic Sentiment Indicator fell to 98.3 from 99.3, missing the 99.8 forecast. Industrial Confidence also deteriorated, dropping to -7.1 from -6.8.

Looking ahead, attention now turns to Friday’s US Producer Price Index (PPI) data for January. Analysts expect headline PPI to rise 0.3% MoM, easing from the previous 0.5% increase. On an annual basis, PPI is forecast to moderate to 2.6% from 3.0%.