Near 1.1200: Euro slips as traders look ahead to US jobs figures

1.1215 is the approximate level as EUR/USD eases in early Asian trading on Friday.
The Euro’s decline could be contained by hawkish comments from ECB policymakers.
Friday’s US employment figures for September are in focus as traders await a fresh catalyst.

1.1215 is the approximate level for EUR/USD. The pair retreats in Friday’s early Asian trading as caution weighs on sentiment. A hawkish European Central Bank (ECB), however, could restrict further losses. Attention now turns to the US September employment report due later on Friday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A deteriorating inflation outlook will probably prompt the central bank to raise borrowing costs next month, ECB Governing Council member Joachim Nagel said on Tuesday. Fellow ECB policymaker Klaas Knot also indicated that a hawkish stance would likely remain necessary, alongside vigilance towards inflation shocks. While economists anticipate a final rate move next month, markets price in further tightening beyond that point, extending into 2027.

An overnight drop of about 10 basis points (bps) took the two-year US Treasury yield to 4.47%. This maturity is particularly sensitive to interest rate expectations. Softer Treasury yields could pressure the Greenback, providing support for the major currency pair.

Shifting expectations for the Federal Reserve (Fed) were also evident in the bond move. According to the CME FedWatch tool, Fed funds futures reduced the implied chance of a 25 bps interest rate increase in December to around 70%, compared with more than 70.9% on Thursday.

To assess the Fed’s future rate trajectory, traders will look to Friday’s US employment release for further guidance. The Nonfarm Payrolls (NFP) report is expected by economists to show 65,000 additional jobs in September. For the same month, the Unemployment Rate is forecast to remain at 4.2%.

Referring to the non-farm payrolls release, MUFG analysts said: "Recent data suggests improvement in the labor market, and we expect that to continue with this report,"

Two-month lows in Euro and US breakevens as Euro inflation figures anchor swaps

October’s flash Euro Area CPI release provided a significant insight into price trends despite an otherwise light data schedule, Deutsche Bank analysts observe. The figures, they note, "came in as expected by the consensus, with headline inflation up to a 3-year high of +4.0% in October, whilst core inflation remained at +2.5%." They associate the release with a substantial adjustment in short-term inflation expectations, explaining that "that led to a huge decline in inflation expectations, with the Euro 1yr inflation swap (-25.9bps) down to a two-month low of 3.10%, whilst the 1yr US inflation swap (-24.9bps) hit a two-month low of 2.16%."

European sovereign bonds rallied strongly alongside the repricing in inflation swaps, Deutsche Bank notes. On yields, the bank reports that "yields on 10yr bunds (-5.8bps) fell to 3.27%, whilst 10yr OATs (-17.6bps) saw their biggest daily decline since April, falling to 4.77%." Core-periphery spreads narrowed as well. The bank adds that "that also pushed the Franco-German 10yr spread down by -11.8bps to 150bps, marking its tightest level in the last couple of weeks."

6.2/10 speech score signals Lagarde’s hawkish tilt amid inflation risks

A score of 6.2/10 on FXS Speechtracker puts ECB President Lagarde’s speech modestly above the historic average of 5.6/10. This indicates a slightly stronger impact and a more hawkish tone. Her emphasis that it is “still necessary to apply tools to avoid inflation running away”, together with the difficulty of separating the effects of different shocks, suggests a continuing ECB preference for tight policy. Uncertainty over supply and demand dynamics nevertheless remains.

A guarded approach to external risks emerges from comments that US tariffs are unlikely to be reconsidered soon and that US mid-term votes may influence trade only gradually. Growth and trade channels could transmit these effects to the Euro. References to the opposing forces of the energy shock and AI illustrate the complexity of the backdrop, which is likely to keep the ECB alert. As markets factor in a lasting commitment to fighting inflation, this reinforces a mildly positive bias for the Euro.

Technical Analysis: 100-day SMA caps EUR/USD as negative bias persists

Below the 100-day simple moving average (SMA), EUR/USD continues to show a bearish near-term bias on the daily chart. Trading just beneath the upper Bollinger Band points to pressure on the upside. The pair nevertheless remains above the middle Bollinger band, its first support level. At 46.7, the Relative Strength Index (14) is below its midpoint, signalling limited bullish momentum. This supports the view that overhead supply continues to constrain the recovery.

The upper Bollinger Band near 1.1260 provides the first upside hurdle, with stronger resistance following at the 100-day SMA around 1.1415. Initial downside support lies at 1.1195, the middle Bollinger band. Below that, the lower Bollinger band around 1.1130 forms a further defensive zone, where selling could pause before another attempt at fresh lows.

(The technical analysis of this story was written with the help of an AI tool. Learn more.)

Euro: frequently asked questions

Which countries use the Euro, and how widely is it traded?

Used by the 20 European Union countries in the Eurozone, the Euro ranks second only to the US Dollar in global currency trading. Its share of all foreign exchange transactions reached 31% in 2022, with average daily turnover exceeding $2.2 trillion. An estimated 30% of all transactions involve EUR/USD, making it the world’s most actively traded currency pair. Next come EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What role does the ECB play in the Euro’s performance?

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, setting interest rates and directing monetary policy. Price stability is its principal mandate, pursued by containing inflation or supporting growth. Interest rate increases and reductions are its main policy instrument. Higher relative rates, or expectations of increases, generally support the Euro; lower rates tend to have the opposite effect. Monetary policy is decided by the ECB Governing Council at eight meetings each year. The decision-makers comprise the heads of Eurozone national banks and six permanent members, among them ECB President Christine Lagarde.

Why do inflation figures matter for the Euro?

Measured through the Harmonised Index of Consumer Prices (HICP), Eurozone inflation is a key economic gauge for the Euro. An above-forecast increase in inflation, particularly beyond the ECB’s 2% target, requires the central bank to raise interest rates to regain control of prices. When interest rates in the region exceed those elsewhere, the Euro usually benefits. The higher returns make the Eurozone a more attractive destination for global investors’ funds.

What do economic releases mean for the Euro?

By indicating the economy’s health, data releases can move the Euro. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys are among the indicators that can shape the single currency’s direction. Economic strength supports the Euro by drawing in more overseas investment. It may also prompt the ECB to raise interest rates, directly strengthening the currency. Weak economic readings, by contrast, are likely to weigh on the Euro. Germany, France, Italy and Spain together represent 75% of the Eurozone economy. Releases from these four largest euro area economies therefore carry particular importance.

Why does the Trade Balance matter for the Euro?

The Trade Balance is another important release for the Euro. Over a specified period, it compares a country’s export earnings with its spending on imports. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers seek to purchase those goods, lifting its value. A positive net Trade Balance therefore supports a currency, while a negative balance has the reverse effect.