EUR/USD holds around 1.1650 as markets await US Nonfarm Payrolls data

EUR/USD Steadies After Consecutive Losses

The EUR/USD currency pair has stabilized near 1.1650 during Friday's Asian trading session, following five straight days of declines. Market participants are adopting a cautious stance as they await the release of the US Nonfarm Payrolls (NFP) report, which is anticipated to provide fresh clues about the state of the labor market and the Federal Reserve’s policy direction. Projections for December’s NFP indicate an increase of 60,000 jobs, a slight decrease from November’s 64,000 gain.

Despite the recent pause in losses, the pair may encounter additional downward pressure as the US Dollar (USD) gains strength in response to new US labor data. According to the US Department of Labor (DOL), Initial Jobless Claims for the week ending January 3 rose to 208,000, which was marginally below the forecast of 210,000 but higher than the revised figure of 200,000 from the previous week. Continuing jobless claims also climbed, reaching 1.914 million compared to 1.858 million previously, suggesting a gradual uptick in the number of individuals receiving unemployment benefits.

Eurozone Economic Developments

Within the Eurozone, the European Commission’s Business Climate Index improved to -0.56 in December from -0.66, indicating a slight recovery in business conditions. Consumer Confidence also saw an uptick, rising to -13.1 from -14.6, while the Economic Sentiment Indicator slipped marginally to 96.7 from 97.1.

The Eurozone’s Producer Price Index (PPI) increased by 0.5% month-over-month in November, accelerating from the previous 0.1% and surpassing expectations of a 0.2% rise. However, on an annual basis, producer prices dropped by 1.7%, marking the fourth consecutive month of yearly declines. Additionally, the region’s unemployment rate edged lower to 6.3% in November, down from 6.4%.

ECB Insights and Inflation Outlook

On Thursday, ECB Vice President Luis de Guindos remarked that the current interest rate levels are “appropriate” and noted that inflation has reached its target, though significant uncertainty persists.

Analysts at BBH FX highlight that the ECB’s recent consumer survey indicates stable inflation expectations, supporting the case for maintaining interest rates at 2.00%. The central bank’s November CPI consumer expectations survey suggests that policymakers are well positioned to keep rates unchanged. Inflation forecasts for the next 1, 3, and 5 years remained steady at 2.8%, 2.5%, and 2.2%, respectively, aligning with the ECB’s medium-term inflation goal of 2%.