The EUR/USD pair trades near its weekly high, supported by a cooling US labor market and risk-on sentiment. However, concerns about potential US tariffs and the ECB's dovish stance limit gains.
The EUR/USD currency pair is currently trading near its weekly high, hovering around the 1.0375-1.0380 region. Despite this week's solid recovery from a 1.0200 low, the pair has struggled to make significant gains. This consolidation comes amidst mixed signals from the economic landscape. On the one hand, the US labor market appears to be cooling, as evidenced by the Job Openings and Labor Turnover Survey (JOLTS) which suggests a slowdown.
This fuels expectations of further Federal Reserve (Fed) rate cuts, weakening the US Dollar (USD) and providing support to the EUR/USD pair. The risk-on sentiment further contributes to the USD's depreciation.However, concerns about potential trade tariffs imposed by US President Donald Trump on European Union goods are tempering bullish bets on the Euro. Additionally, the European Central Bank's (ECB) dovish stance, which overshadows the recent rise in Eurozone inflation, is putting a cap on the Euro's potential appreciation. While the Eurozone Harmonized Index of Consumer Prices (HICP) increased to 2.5% in January, the ECB's continued accommodative monetary policy suggests a reluctance to tighten policy aggressively.Traders are now awaiting key economic releases, including the final Eurozone Services PMI, the ADP report on private-sector employment, and the ISM Services PMI. Speeches by influential Federal Open Market Committee (FOMC) members will also be closely watched for insights into the future direction of US monetary policy. The spotlight will ultimately be on the US monthly employment report – the Nonfarm Payrolls (NFP) report – scheduled for release on Friday. This data will provide crucial clues about the strength of the US labor market and could significantly impact both the USD and EUR/USD
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