Euro Steady as Investors Await Catalysts

The euro held steady at $1.14 as investors waited for new drivers. Last week, the currency fell 0.5% against the USD after weaker-than-expected US nonfarm payrolls. Gains for the euro were limited by softer Eurozone inflation and dovish remarks from ECB President Christine Lagarde, which lowered expectations for a third rate hike this year. Markets still anticipate a second hike, likely in September. June data revealed headline inflation slowing to 2.8% from 3.2% in May, below forecasts, while core inflation eased to 2.4%, also missing expectations. At the ECB’s Sintra Forum, Lagarde noted reduced risks to euro-area inflation and growth, citing lower energy price pressures from the US-Iran peace deal.

The euro ended the week just above $1.14, gaining 0.5% as the dollar weakened following disappointing US nonfarm payrolls. The US economy added only 57,000 jobs last month, far below expectations, while the unemployment rate unexpectedly fell to 4.2% as workers left the labor force. The euro’s advance was capped by softer Eurozone inflation and dovish comments from ECB President Christine Lagarde, which reduced expectations for a third ECB rate hike this year. Markets still favor a second hike as the most likely outcome. June data showed headline inflation slowing to 2.8% from 3.2% in May, below forecasts, while core inflation eased to 2.4%, also missing expectations. At the ECB’s Sintra Forum, Lagarde noted that risks to euro-area inflation and growth had diminished, citing lower energy price pressures from the US-Iran peace deal.

The euro rose toward $1.15, 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.