The EUR/USD currency pair has reached its highest point since late September, amid US Dollar pressure due to delayed US jobs data. The US labour market showed softer hiring momentum, with unemployment rising to a four-year high of 4.6%, surpassing expectations of 4.4%. Nonfarm Payrolls increased by 64,000 in November, slightly more than forecasted, while October’s figures were notably revised downward.
Additionally, there was a modest Monthly wage growth of 0.1%, underperforming against a 0.3% forecast. Retail sales remained unchanged, failing to meet the expected 0.1% increase. Nonetheless, Retail Sales excluding autos rose by 0.4% and the Control Group increased by 0.8%, resulting in a mixed economic outlook.
Us Dollar Index And Fed Expectations
The US Dollar Index is steady near 97.96, noted to be its lowest level since early October. In December, preliminary PMI results illustrate a decline in business activity, with the Composite PMI falling to 53.0. The Fed is anticipated to keep interest rates steady at the next meeting, despite prior rate cuts earlier this year. Continuous cautiousness surrounds future policy adjustments amid softening economic indicators.
The US Dollar is clearly under pressure following weak jobs and business activity data, and we should position for this trend to continue in the coming weeks. The EUR/USD breaking to a three-month high of 1.1800 is a significant technical signal. This weakness in the dollar is a direct result of a cooling US economy.
The latest Nonfarm Payrolls report showed the unemployment rate jumping to 4.6%, a figure we have not seen since the post-pandemic recovery period of 2021. This, paired with sluggish wage growth and declining PMI numbers, reinforces the Federal Reserve’s cautious path after cutting rates by 75 basis points throughout 2025. The market is right to expect further policy easing next year.
Euro Expected To Gain As ECB Maintains Stance
For the EUR/USD pair, we should consider buying call options to capitalize on further upward momentum. The latest CFTC data for the week ending December 9th showed a significant increase in net-long Euro positions by large speculators, suggesting this move has momentum. In the options market, the one-month risk reversal for EUR/USD has flipped positive to 0.15, indicating that bets on a higher price are now more in demand than bets on a fall.
This dollar weakness is happening while the European Central Bank remains less eager to cut rates. Recent inflation data from the Eurozone showed core CPI for November holding firm at 3.1%, giving ECB officials a reason to maintain their stance. This policy divergence between a dovish Fed and a more neutral ECB adds fuel to the EUR/USD rally.
Beyond currencies, the expectation of two Fed rate cuts in 2026 means we should look at interest rate derivatives like SOFR futures to position for lower rates ahead. The softening dollar also makes this a good time to evaluate long positions in assets priced in dollars, such as gold. We must be prepared for short-term volatility but the broader trend appears set.
