The EUR/USD pair is trading with little movement during the Asian session on Wednesday, hovering around 1.1380 after a mild pullback in the previous session. While subdued, the pair may find upward traction as the US Dollar (USD) struggles amid market unease over escalating tariff tensions and their potential drag on US economic growth.
The cautious sentiment follows stronger-than-expected US labor data. The Job Openings and Labor Turnover Survey (JOLTS) showed 7.39 million job openings in April, surpassing both the prior month’s 7.2 million and market expectations of 7.1 million. While the data reflects a resilient labor market, attention now shifts to Friday’s US Nonfarm Payrolls (NFP) report, which is forecast to show 130,000 job additions. A robust print could support the Greenback and weigh on EUR/USD.
Geopolitical uncertainty continues to linger. US Treasury Secretary Scott Bessent said a meeting between President Donald Trump and Chinese President Xi Jinping could happen soon, potentially to address recent trade frictions. This follows conflicting developments: Trump recently accused China of violating a tariff truce, while Beijing maintains it has upheld its commitments by suspending or cancelling specific trade measures.
In the Eurozone, inflation data is shaping expectations for Thursday’s European Central Bank (ECB) policy decision. The Harmonized Index of Consumer Prices (HICP) slipped to 1.9% year-over-year in May, marking the first sub-2% reading in eight months and falling below the ECB’s inflation target. Meanwhile, the core HICP—excluding energy and food—dropped to 2.3% from April’s 2.7%.
With inflation cooling, markets have fully priced in a 25 basis point rate cut from the ECB, which would bring the Deposit Facility Rate down to 2%. The expected easing may limit the Euro’s upside in the short term, even as weaker US data or dovish Federal Reserve expectations pressure the Dollar.
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