EUR/USD remained under pressure for a fifth consecutive session, trading around 1.0240 during Asian trading hours on Monday. The pair faces significant headwinds as the U.S. Dollar (USD) strengthens, fueled by stronger-than-expected U.S. job growth in December.
According to the U.S. Bureau of Labor Statistics (BLS), December Nonfarm Payrolls (NFP) rose by 256,000, surpassing the market consensus of 160,000 and exceeding the revised November figure of 212,000. The U.S. Unemployment Rate also edged lower to 4.1% from 4.2% in November. However, annual wage inflation, as measured by the change in Average Hourly Earnings, saw a slight dip to 3.9% from 4% in the prior reading.
The stronger-than-expected labor market data is likely to support the U.S. Federal Reserve’s (Fed) decision to keep interest rates steady in January, strengthening the Greenback against other currencies. Market expectations, as indicated by the CME FedWatch Tool, suggest that the Fed will maintain its key interest rate in the 4.25%-4.50% range during its next meeting at the end of January.
Meanwhile, the Euro (EUR) faces headwinds as traders anticipate multiple rate cuts by the European Central Bank (ECB), with four cuts expected before summer. ECB policymakers appear to be aligned with these dovish expectations, given that inflationary pressures in the Eurozone remain largely contained.
On Wednesday, ECB policymaker and Bank of France Governor François Villeroy indicated that while price pressures might rise slightly in December, the central bank will continue to raise interest rates toward the neutral rate, without slowing the pace, provided that upcoming data confirms inflationary pressures are not persistent. This dovish outlook adds further downward pressure on the Euro.
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