The EUR/USD pair experiences a decline despite the Dollar reducing some of its previous gains on Friday, influenced by robust US economic data released throughout the week, which has enhanced the labor market outlook. This reduced the likelihood of additional easing by the Federal Reserve, providing support for the Greenback. The pair is currently trading at 1.1599, reflecting a decrease of 0.08%.
The EUR/USD pair experiences a decline as robust US jobless claims and factory inflation contribute to an increase in Treasury yields. Markets reduce expectations for Fed easing due to political uncertainty surrounding the upcoming Fed Chair appointment. German inflation reaches the ECB’s 2% target, providing minimal backing for the shared currency.
> The Euro experiences a slight decline as robust US labor and production figures support the Dollar, even as momentum begins to wane: The shared currency is set to conclude the week on a down note, after the robust jobless claims data released on Thursday. The recent spike in factory inflation, coupled with US President Trump’s hesitance to nominate Kevin Hassett as Fed Chair, has resulted in an increase in US Treasury yields and a decrease in expectations for additional Fed easing. As a result, the Dollar regained some of its lost value. US Treasury Secretary Scott Bessent indicated that the decision regarding the Fed Chair will be revealed prior to Davos, and that Governor Stephen Miran is able to remain at the central bank beyond January 31st. On Friday, multiple Federal Reserve officials made headlines, with Vice-Chair Philip Jefferson, Governor Michelle Bowman, and Boston Fed President Susan Collins taking the lead. Aside from Bowman’s endorsement of additional rate cuts, Jefferson and Collins view the current policy stance as favorable. In December, US Industrial Production increased by 0.4%, surpassing expectations that anticipated a decline to 0.1%, as reported by the Federal Reserve. In Europe, the agenda was relatively sparse with the publication of German inflation, which reached the European Central Bank’s goal of 2% year-over-year in December.
Latest FX Rate Trends: Euro declines as inflation eases
- The US Dollar Index, which monitors the performance of the American currency against six counterparts, is currently up 0.03% at 99.38. US Treasury yields are experiencing a significant increase after the Hassett headline, with the 10-year T-note yield rising almost five basis points to 4.219%.
- The recent US economic data presents a varied inflation landscape, indicating that consumer prices are stabilizing, whereas producer-side inflation has surged significantly. On an annual basis, headline CPI remained steady at 2.7%, showing little variation from November, while PPI increased to 3.0%, rising from 2.8% the previous month, indicating persistent cost pressures upstream.
- The labor market demonstrated notable resilience. Last Friday’s Nonfarm Payrolls report demonstrated strength, even though it fell short of expectations, while the Unemployment Rate decreased to 4.4%, surpassing the Fed’s 4.5% estimate. Supporting this trend, Initial Jobless Claims decreased from 207K to 198K, indicating a reduction in the number of Americans seeking unemployment benefits.
- Vice-Chair Jefferson indicated that officials prefer not to prejudge the decision in January, noting that the current policy stance positions the US effectively to assess the timing and extent of any rate adjustments. Governor Bowman contended that the Federal Reserve ought to continue its easing cycle, asserting that further rate cuts are justified given the increasing risks in the jobs market.
- In the meantime, Boston Fed President Susan Collins emphasized the significance of central bank independence, highlighting that a successful central bank must be accountable while also having the freedom to make challenging and possibly unpopular choices in order to fulfill its mandate.
- This week, US economic data indicated a rise in inflation on the producer side, while the labor market, despite showing signs of weakness, continues to demonstrate resilience following a robust Initial Jobless Claims report on Thursday. As a result, market participants scaled back their expectations for future rate cuts by the Fed in 2026.
- The US Dollar Index, which monitors the performance of the American currency against six counterparts, has increased by 0.03% to reach 99.38.
- In light of the current situation, traders reduced the likelihood of additional easing measures by the Federal Reserve. According to Prime Market Terminal data, an easing of 43 basis points is anticipated by the end of 2026.
- The final Harmonized Index of Consumer Prices for Germany, released on Friday, indicated a moderation in inflationary pressures. In December, prices experienced a month-on-month increase of 0.2%, countering the -0.5% decline observed in November. Meanwhile, the annual inflation rate decreased to 2.0%, a reduction from the previous rate of 2.6%. The data led to a slight recovery in the Euro, which moved up from session lows after the announcement.