EUR/USD holds gains near a four-month high at 1.0853, reached March 7.
The US Dollar struggles as Treasury yields fall on rising dovish sentiment surrounding the Fed’s policy outlook.
ECB President Christine Lagarde cautioned that risks to growth remain skewed to the "downside."
EUR/USD edges higher after registering losses in the previous session, trading around 1.0810 during the Asian hours on Friday. The pair gains ground as the US Dollar loses ground, driven by falling Treasury yields as markets anticipate more aggressive Fed rate cuts this year amid US growth concerns.
US Initial Jobless Claims for the week ending March 1 dropped to 221K, compared to 242K in the previous week, according to the US Department of Labor (DOL) on Thursday. This figure came in below the market consensus of 235K. US NFP is expected to show a modest rebound in job growth. Projections suggest net job additions will rise to 160K in February, up from January’s subdued 143K.
Meanwhile, traders remain focused on global trade developments, as Canada postpones its planned second round of retaliatory tariffs on US products until April 2. This decision follows US President Donald Trump’s exemption of Mexican and Canadian goods under the USMCA from his proposed 25% tariffs.
On Thursday, the European Central Bank (ECB) cut its Deposit Facility Rate by 25 basis points (bps) for the fifth consecutive time, bringing it down to 2.5%, as expected. The Main Refinancing Operations Rate was also lowered by 25 bps to 2.65%, in line with forecasts.
During a press conference, ECB President Christine Lagarde explained that the decision to ease rates was aimed at supporting economic stability. However, she cautioned that risks to growth remain skewed to the "downside." Lagarde also warned that trade tensions, driven by US President Donald Trump’s tariff policies, could further dampen economic growth.
While markets continue to seek additional rate cuts to reduce financing and borrowing costs, persistent inflation in the EU—and now in the US, following a recent uptick in key inflation indicators—has constrained central banks' ability to adjust rates more aggressively.
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