The Euro continues to decline on Thursday following the European Central Bank’s decision to keep rates steady in a rather uneventful monetary policy meeting. The jobs data in the United States came in below expectations, leading to increased speculation regarding potential rate cuts by the Federal Reserve. The EUR/USD is currently at 1.1777, reflecting a decrease of 0.25%.
EUR/USD continues to decline as the ECB keeps rates steady and adopts a neutral, data-driven approach. The prevailing risk-off sentiment strengthens the Dollar, while equities and cryptocurrencies decline, primarily driven by significant losses in US technology stocks. Weaker US labor data enhances expectations for a Federal Reserve rate cut, as markets anticipate more substantial easing measures.
> The Euro has declined beneath 1.1800 as a lackluster ECB decision coincides with heightened risk aversion and disappointing US jobs data: This risk aversion has shifted investors’ focus towards the US Dollar in the foreign exchange market. The decline was led by nine of the eleven sectors within the S&P 500, resulting in a loss of 1.2%. The Nasdaq experienced a drop of more than 1.59%, while alternative assets such as Bitcoin fell sharply by over 13%. In addition to this, US jobs data indicated that private companies are reducing job postings and showing hesitance in their hiring practices. As a result, the number of Americans applying for unemployment benefits increased. In light of the current situation, there has been an increase in expectations that the Fed will have to lower interest rates, with money markets anticipating a reduction of 60 basis points, as indicated by Prime Market Terminal data. Earlier, the ECB maintained its interest rates at the same level and emphasized that it does not follow a predetermined course, opting instead to remain responsive to data on a meeting-by-meeting basis. During the press conference, ECB President Lagarde maintained a neutral stance and confirmed that monetary policy was “in a good place.” Following the ECB’s decision and the release of US data, the EUR/USD struggled to find momentum, staying below 1.1800. However, its declines were limited due to increasing expectations for a dovish Fed.
Latest FX Rate Trends: Euro remains steady amid disappointing US data
- On Thursday, the US jobs data reflected disappointing results. Challenger, Gray and Christmas reported that US employers reduced their workforce by 108,435 individuals, with Amazon, UPS, and Dow, Inc representing nearly half of this total in December.
- The increase in Initial Jobless Claims for the week ending January 31 may lead the Fed to contemplate rate cuts sooner rather than later. Jobless claims increased by 231K, surpassing the anticipated figure of 212K, and rising from the prior reading of 209K.
- The Job Openings and Labor Turnover Survey for December highlighted a trend of a cooling labor market, as vacancies decreased to 6.542 million from 6.928 million in November, significantly under the 7.2 million projections.
- Nevertheless, the Greenback appreciated. The US Dollar Index, which measures the performance of the greenback against a selection of six currencies, increased by 0.31% to reach 97.95.
- Money markets have raised expectations for Fed easing by year-end, now pricing in 56 basis points of cuts, an increase from the previous 50 bps, as per Prime Market Terminal data.
- During the conference, Lagarde maintained a neutral stance and focused on discussing fluctuations in exchange rates. She indicated that the ECB is monitoring the markets closely, yet concluded that there have been no significant changes in recent months. Lagarde noted that the central bank has incorporated into their baseline the movements in the FX markets, without considering any plans for intervention.