EUR/USD drifts lower to approximately 1.1420 in the early Asian session on Friday. Traders have scaled back their expectations regarding ECB rate hikes in light of the recent softer inflation data from the Eurozone. US Nonfarm Payrolls fell short of projections, increasing by 57,000 in June. The EUR/USD pair experiences a decline to approximately 1.1420 in the early Asian session on Thursday, influenced by a subdued inflation outlook in the Eurozone. The US Dollar strengthens against the Euro despite disappointing US June labour data. European Central Bank President Christine Lagarde is set to deliver remarks later on Friday.
Eurozone headline CPI experienced a greater-than-anticipated decline, decreasing to 2.8% year-on-year in June from 3.2% in May, as reported by Eurostat on Wednesday. The core inflation decreased to 2.4% year-over-year in June, down from 2.6% in the prior assessment. This report has alleviated the pressure on the ECB to uphold a markedly aggressive interest rate policy, impacting the shared currency. Financial markets assign a probability of one-third to a potential rate hike in July, while the likelihood of such a move by October is completely factored into current pricing, as reported by a source.
ECB policymakers and Maltese central bank chief Alexander Demarco stated on Wednesday that the central bank should exercise caution regarding any further rate hikes in light of the unexpectedly swift decline in oil prices. Meanwhile, Lagarde asserted that the ECB’s decision to raise interest rates last month was justified, noting that the central bank is closely monitoring the potential for second-round effects, despite their absence thus far.
Conversely, the disappointing US Nonfarm Payrolls data could weaken the Greenback and limit the downside for the major pair. The US economy experienced an addition of 57,000 jobs in June, falling short of the market consensus which anticipated 110,000, as reported by the US Bureau of Labour Statistics on Thursday. Additionally, the Unemployment Rate decreased to 4.2% during the same period, a decline from 4.3% in May. That followed a report on Wednesday indicating that US private payrolls experienced an increase that fell short of expectations in June.