The EURUSD currency pair tried to stretch for a fourth straight day of gains, but markets are drawing into the middle ahead of Friday’s key US nonfarm payrolls (NFP) print.
The Euro saw a sharp rejection from the 1.0850 level on Thursday, ending a three-day win streak. EURUSD has had a stellar week, climbing 4.6% bottom-to-top from Monday’s opening bids.
Forex markets have sharply rebalanced after rate cut expectations took a tumble this week.
According to rate markets, the European Central Bank is broadly expected to only cut interest rates one more time in 2025 following Thursday’s 25 bps rate trim.
With the Euro facing a much tighter interest rate differential than previously expected, EURUSD took a hard step higher this week.
Markets remain hungry for more rate cuts to ease financing and borrowing costs, but still-sticky inflation in the EU (and now the US following a recent uptick in key inflation metrics) has hobbled central banks’ ability to enact rate adjustments.
US President Donald Trump shifted his stance on tariffs once again, revealing a temporary suspension on tariffs for all products encompassed by the USMCA agreement, which he personally negotiated in his first term.
Even as the Trump administration continues to retract its previous tariff threats, markets are finding it challenging to regain enough risk appetite to trend upward.
On Friday, the NFP jobs data will take on greater importance as investors closely monitor economic indicators.
While the US economy remains generally strong, signs of weakness are emerging in the labour market. Additionally, a fresh wave of inflationary pressures, primarily due to concerns over tariffs, dampens growth forecasts.
EURUSD chart by TradingView
(Source: OANDA)