- Amid the US dollar's weakness on Monday, EUR/USD extended its gains to 1.0765.
- U.S. employment growth slowed more than expected in April, increasing the probability that the Fed will cut interest rates in September.
- Economists said the prospect that the ECB would diverge from the Fed on interest rate cuts could weigh on the euro.
In the first half of Asian trading on Monday, the EUR/USD pair has been trading in positive territory for the fourth straight day at around 1.0765. The weak US dollar (USD) is providing some support to major currency pairs. Traders are awaiting the release of HCOB Purchasing Managers' Index (PMI) data for Germany and the Eurozone later in the day, as well as the Eurozone Producer Price Index (PPI).
The latest U.S. employment figures released by the U.S. Bureau of Labor Statistics (BLS) on Friday showed that U.S. job growth in April was slower than expected. Nonfarm payrolls (NFP) was weaker than expected, increasing by 175,000 in April from 315,000 in March (revised from 303,000), the smallest increase since October 2023. became a people. Meanwhile, wage inflation, as measured by changes in average hourly wages, fell from 4.1% to 3.9% annually. The unemployment rate rose to 3.9% in April from 3.8% in March.
Lower-than-expected U.S. economic data has increased the probability that the U.S. central bank will cut interest rates in September. Financial markets are pricing in a nearly 90% chance of a September rate cut, up from 55% last week, according to the CME FedWatch tool. This will weigh on the US dollar and provide a tailwind for EUR/USD.
On the other side of the pond, the final Eurozone Services PMI is expected to remain stable at 52.9 in April, while the Composite PMI is expected to remain unchanged at 51.4. Additionally, the Eurozone's PPI in March is estimated to be -7.7% year-on-year, and -8.3% in February.
Inflation in the euro area remained stable as expected in April, prompting the European Central Bank (ECB) to call for interest rate cuts in June. Economists say the outlook for the ECB to diverge from the Federal Reserve on interest rate cuts is likely to be “particularly negative” for the euro zone, putting some selling pressure on the euro (EUR) against the US dollar. He said it was possible.
