EUR/USD weakens to near 1.1900 as traders eye US data
- EUR/USD softens to near 1.1905 in Tuesday’s early European session.
- Traders remain cautious ahead of a US data-heavy week.
- The ECB is anticipated to keep interest rates steady through the remainder of 2026.
The EUR/USD pair loses ground to around 1.1905, snapping the two-day winning streak during the early European trading hours on Tuesday. Markets might turn cautious ahead of the release of key US economic data, including US employment and inflation reports that were pushed back slightly due to the recently ended four-day government shutdown.
White House economic adviser Kevin Hassett said on Monday that US job growth might stall in the coming months due to slower labor force growth and higher productivity.
The Nonfarm Payrolls (NFP) report, which is due on Wednesday, is projected to show an increase of 70,000 jobs in January, while the Unemployment Rate is estimated to hold steady at 4.4% during the same period. In case of weaker-than-expected outcomes, this could weigh on the Greenback and act as a tailwind for the major pair. On the other hand, any signs of improvement in the US labor market could underpin the USD against the Euro.
Across the pond, the European Central Bank (ECB) held its benchmark interest rate at 2.0% for the fifth meeting in a row last week, as widely expected. During the press conference, ECB President Christine Lagarde said that the central bank would maintain its data-dependent and “meeting-by-meeting approach” and would not be “precommitting to a particular rate path.”
Around 85% of economists surveyed by Reuters in their January poll said the ECB would keep the interest rates steady over the rest of 2026.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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