- EUR/USD weakens to around 1.1860 in early European trading on Thursday.
- The positive US jobs report dampens bets on further interest rate cuts from the Fed and supports the US dollar.
- The ECB is expected to keep interest rates unchanged for the rest of 2026 and maintain its data-dependent approach.
The EUR/USD pair is trading in negative territory near 1.1860 for the third straight day in early European trading on Thursday. Traders will keep an eye on the weekly US initial jobless claims. On Friday, attention will turn to the US Consumer Price Index (CPI), which affects inflation.
The greenback is strengthening against the euro (EUR) as traders reduce bets on a Federal Reserve (Fed) interest rate cut in March following positive US jobs data. The Bureau of Labor Statistics said Wednesday that U.S. Nonfarm Payrolls (NFP) rose by 130,000 in January, higher than expectations of 70,000. The unemployment rate fell to 4.3% in January from 4.4% in December, better than the forecast of 4.4%.
Financial markets now expect a nearly 94% chance that the Fed will leave interest rates unchanged at its next meeting, up from 80% the day before, according to the CME FedWatch tool.
Across the pond, growing acceptance that the European Central Bank (ECB) will keep interest rates stable for the rest of the year could support the common currency. ECB President Christine Lagarde said during the press conference that the central bank would maintain its data-dependent and “session-by-session approach” and would not “commit to a particular interest rate path.”
Around 85% of economists polled by Reuters in its January poll showed the ECB would keep interest rates unchanged for the rest of 2026.
Euro – Frequently Asked Questions (FAQ)
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most traded currency in the world after the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion per day. The EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of all transactions. This is followed by EUR/JPY at 4%, EUR/GBP at 3% and EUR/AUD at 2%.
The European Central Bank (ECB) in Frankfurt, Germany, is the central bank of the Eurozone. It sets interest rates and controls monetary policy. The ECB’s main goal is price stability, which means either controlling inflation or promoting growth. Their main tool is raising or lowering interest rates. Relatively high interest rates or the expectation of higher interest rates usually strengthen the euro and vice versa. The Governing Council of the ECB makes monetary policy decisions in eight meetings per year. These will be made by the heads of the euro zone’s national central banks and six permanent members, including ECB President Christine Lagarde.
Inflation in the Eurozone, as measured by the Harmonized Index of Consumer Prices (HICP), is a crucial factor for the euro. If inflation exceeds the European Central Bank’s (ECB) expectations and 2% target, the ECB will likely have to raise interest rates to maintain price stability. Higher interest rates compared to other currency areas make the euro more attractive for global investors and thus strengthen the currency.
Publications of economic data influence the health of the economy and therefore the euro. Indicators such as gross domestic product (GDP), purchasing managers’ indices (PMI), employment figures and consumer sentiment provide indications of the development of the common currency. A strong economy supports the euro as it attracts foreign investment and potentially prompts the European Central Bank (ECB) to raise interest rates. Weak data, on the other hand, often causes the euro to fall. Particularly relevant here are the data from the four largest economies in the euro area – Germany, France, Italy and Spain – which make up around 75% of the euro area economy.
A crucial factor for the euro is the trade balance, which measures the difference between a country’s income from exports and its spending on imports over a certain period of time. When a country produces in-demand export goods, demand for its currency increases as foreign buyers want to purchase those goods. A positive trade balance therefore strengthens the euro, while a trade deficit can put the currency under pressure.
date: 2026-02-12 06:26:00