• The Euro gains to near 1.1455 against the US Dollar as the latter underperforms due to weak US NFP data.
• Investors shift focus to the US ISM Services PMI data for June.
• ECB officials confirm that second-round effects of inflation have not materialized yet.

The Euro (EUR) is up 0.16% to near 1.1455 against the US Dollar (USD) during the European trading session on Friday. The EUR/USD pair gains as the US Dollar underperforms its peers due to a slight ease in hawkish Federal Reserve (Fed) interest rate expectations.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.15% lower to near 100.70.

The odds of the Fed delivering at least one interest rate hike in the September policy meeting have diminished to 53.2% from almost 64% seen on Wednesday, according to the CME FedWatch tool.

The reason behind traders trimming hawkish Fed bets is weak United States (US) Nonfarm Payrolls (NFP) data for June, which showed that the economy created 57K fresh jobs in June, significantly lower than estimates of 110K. Also, the May data was revised lower to 129K from 172K.

Meanwhile, investors shift their focus to the US ISM Services Purchasing Managers’ Index (PMI) data for June, which will be released on Monday.

On the Eurozone front, traders will likely reconsider European Central Bank (ECB) interest rate expectations as officials confirm that second-round effects of inflation have not emerged yet.

On Wednesday, ECB President Christine Lagarde said at the ECB Forum on Central Banking 2026 that second-round inflationary effects have yet to materialize, but we are keeping a close eye on it. Lagarde added, "Risks are more broadly balanced than a few weeks ago."

Also, remarks from ECB policymaker and the head of Belgium's central bank, Pierre Wunsch, released by Econostream on Wednesday, have signaled that he is not in favor of further monetary policy tightening unless second-round effects of inflation start emerging.

Lagarde hints at regret over past guidance as risks rebalance for the Euro

The FXS Speechtracker score of 6.2, above Lagarde’s historic 5.6 average, signals a slightly more impactful and marginally more hawkish tone than usual, driven by the admission of regret about being bound by past forward guidance and the pledge to take necessary steps to contain inflation. The statement that risks are now more broadly balanced and that the Euro area is “not in stagflation” reduces immediate tail-risk fears, but keeps a tightening bias alive if price pressures re‑intensify.

For the Euro, the combination of balanced risk assessment and a clear anti‑inflation commitment supports a modestly constructive bias, especially versus lower‑yielding peers. However, the lack of fresh policy triggers and the emphasis on balance rather than clear upside risks to inflation suggest only limited upside, with markets likely to fade initial Euro strength unless incoming data re‑accelerate price or wage dynamics.