EUR/USD declined to a new yearly low below 1.1600 on Thursday, driven by robust economic data from the US and widespread strength of the US Dollar. Traders exhibited a heightened appetite as Trump softened his rhetoric regarding Iran; however, the data from the Eurozone did not provide the necessary support for the shared currency. The pair is currently at 1.1605, reflecting a decrease of 0.35%.
EUR/USD reaches a yearly low below 1.1600 as risk appetite strengthens. Markets significantly reduce expectations for Fed easing, bolstering demand for the Dollar across major pairs. Attention turns to Eurozone inflation and US Industrial Production for the next directional movement.
> The US Dollar strengthens in response to robust economic data, as traders scale back their expectations for Federal Reserve rate cuts: The market concluded the session with gains, indicating a heightened risk appetite. Positive earnings from Taiwan Semiconductor Manufacturing Co. propelled US equity indices upward, while a robust jobs report strengthened the Dollar. The count of Americans applying for unemployment benefits fell short of projections and the report from the prior week. The report and remarks from Federal Reserve officials led investors to reduce their expectations for additional Fed easing in 2026. Monetary markets had priced 46 basis points of easing, a decrease from 52 during Thursday’s open, as indicated by the Prime Market Terminal interest rate probability tool. Additionally, market participants processed remarks from Regional Fed Presidents Schmid, Daly, Paulson, Barkin, Bostic, and Fed Governor Michael Barr. In Europe, the agenda was limited with the publication of the Eurozone’s Industrial Production report for November and the unveiling of inflation figures in France and Spain, both pertaining to December.
Latest FX Rate Trends: Euro declines under the influence of the Dollar
- US Initial Jobless Claims for the week ending January 10 decreased to 198K from 207K, significantly below the anticipated 215K, highlighting ongoing strength in the labor market.
- There has been an enhancement in manufacturing indicators as well. The New York Empire State Manufacturing Index showed a recovery in January, increasing from -3.7 to 7.7. Meanwhile, the Philadelphia Fed Manufacturing Survey significantly surpassed forecasts, soaring to 12.6 compared to estimates of -2, indicating a widespread improvement in regional factory activity.
- The Greenback showed a favorable response, climbing to a new yearly high, as the US Dollar Index, which measures the dollar’s value against six currencies, increased by 0.30% to reach 99.35.
- Federal Reserve officials expressed diverse perspectives regarding the policy outlook. Jeffrey Schmid indicated that monetary policy is not especially tight, warning that there is no space for complacency regarding inflation. Mary Daly conveyed a more measured perspective, indicating her anticipation of robust economic growth and affirming that policy is appropriately aligned.
- Meanwhile, Thomas Barkin acknowledged that inflation continues to be high, although he observes indications of stabilization within the labor market. Earlier, Atlanta Fed President Raphael Bostic indicated that growth is expected to exceed 2%, yet cautioned that ongoing inflationary pressures support a restrictive approach. Chicago Fed President Austan Goolsbee remarked that the recent jobless claims data was expected, emphasizing that the Fed’s primary focus remains on bringing inflation back to the 2% target.
- In November, Industrial Production in the EZ surpassed expectations, increasing by 0.7% MoM, contrary to predictions of a deceleration to 0.5%. On an annual basis, output growth accelerated to 2.5%, an increase from 2.0% in October and surpassing the 2.0% consensus estimate.