Euro Rebounds as Weak US Jobs Data Weighs on Dollar

The euro rose toward $1.145, rebounding from recent one-year lows as the US dollar weakened after a much softer-than-expected US jobs report. The US economy added just 57,000 jobs last month, well below forecasts, while the unemployment rate unexpectedly fell to 4.2% as many people left the labor force. The euro's gains were limited by weaker-than-expected Eurozone inflation and dovish remarks from ECB President Christine Lagarde. Data showed headline inflation slowed to 2.8% in June from 3.2% in May, below expectations, while core inflation eased to 2.4%, also missing forecasts. Speaking at the ECB's Sintra Forum, Lagarde said risks to euro-area inflation and growth had diminished, reflecting lower energy price pressures since the ECB's rate hike three weeks ago. Meanwhile, optimism over indirect US-Iran talks continued to support lower oil prices, with Qatar announcing that a new round of negotiations would be scheduled soon.

The euro rebounded to $1.14 but remained near one-year lows against the dollar and pound, pressured by softer-than-expected Eurozone inflation and dovish remarks from ECB President Christine Lagarde. Wednesday’s data showed headline inflation falling to 2.8% in June from 3.2% in May, below expectations of 3.0%, while the core rate dropped to 2.4%, also under forecasts of 2.6%. At the ECB’s Sintra Forum, Lagarde noted that risks to euro-area inflation and growth have diminished. This shift follows the ECB’s decision three weeks earlier to become the first G7 central bank to hike rates after the Iran war, citing concerns over inflation spreading. Since then, hopes for a US-Iran peace accord have sharply lowered oil prices, removing a key inflation driver. Elsewhere, traders welcomed progress in indirect US-Iran talks, with Qatar announcing the next meeting would be scheduled as soon as possible. Oil prices continued to fall as more shipments passed through the Strait of Hormuz.

The euro weakened below $1.14, approaching a one-year low after a 2% decline against the US dollar in June. Investors digested softer-than-expected Eurozone inflation data, with the flash CPI report showing headline inflation falling to 2.8% in June and the core rate dropping to 2.4%, offering some relief to European Central Bank policymakers. At the ECB’s Sintra Forum, ECB President Christine Lagarde noted that risks to inflation and growth in the euro area have become less pronounced. This shift follows the ECB’s decision just three weeks earlier to become the first G7 central bank to raise interest rates after the outbreak of the Iran war, justified by concerns over inflation spreading through the economy. Since then, the US-Iran peace accord has significantly reduced oil prices, removing a key inflation driver. Elsewhere, the dollar remains supported by expectations that the US Federal Reserve will raise interest rates later this year.