The euro strengthened, holding above $1.16, driven by a weakening US dollar following disappointing US jobs data. The European economy faces mixed signals with rising fiscal concerns and inflation slightly above target, even as the European Central Bank (ECB) is expected to hold interest rates steady at its upcoming meeting.
- The euro consolidated gains above $1.16.
- US dollar weakened due to softer US jobs data (JOLTS report).
- US job openings fell to 7.18 million in July, the lowest since September 2024.
- Expectations of Federal Reserve rate cuts in September are increasing.
- Fiscal concerns are rising in Europe due to expected higher defense spending and German infrastructure investment.
- French Prime Minister François Bayrou faces a confidence vote on September 8.
- Eurozone inflation accelerated to 2.1% in August, above the ECB’s 2% target.
- ECB is expected to leave interest rates unchanged at next week’s meeting.
The euro’s recent performance is influenced by contrasting forces. Positive momentum comes from weakness in the US dollar, influenced by factors affecting the US Federal Reserve’s monetary policy. However, the euro faces potential headwinds from growing fiscal uncertainties within the Eurozone itself and inflationary pressures. The future direction will likely depend on the outcome of political events and how central banks react to current economic data.