EUR/USD weakens as US jobs data trims Fed rate cut bets

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The EUR/USD pair trades in negative territory for the third consecutive day near 1.1860 during the early European session on Thursday. Traders will keep an eye on the US weekly Initial Jobless Claims data. On Friday, the attention will shift to the US Consumer Price Index (CPI) inflation report.

EUR/USD softens to around 1.1860 in Thursday’s early European session.
The upbeat US jobs report tempers bets for more Fed rate cuts, supporting the US Dollar.
The ECB is expected to leave rates unchanged over the rest of 2026, maintaining its data-dependent approach.

The Greenback strengthens against the Euro (EUR) as traders trim bets for a March Federal Reserve (Fed) rate cut after the upbeat US jobs data. The Bureau of Labor Statistics revealed on Wednesday that the US Nonfarm Payrolls (NFP) climbed by 130,000 in January, stronger than the expectation of 70,000. The Unemployment Rate fell to 4.3% in January from 4.4% in December, better than the projection of 4.4%.

According to the CME FedWatch tool, financial markets are now pricing in nearly a 94% probability that the Fed will leave rates unchanged at its next meeting, up from 80% from the previous day.

Across the pond, the growing acceptance that the European Central Bank (ECB) would likely hold interest rates steady for the rest of the year could support the shared currency. ECB President Christine Lagarde said during the press conference that the central bank would maintain its data-dependent and “meeting-by-meeting approach” and would not be “precommitting to a particular rate path.”

Around 85% of economists surveyed by Reuters in their January poll showed the ECB would leave the interest rates unchanged over the rest of 2026.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.