EUR/USD has stabilised within the 1.08-1.09 range after a week of high volatility, marking its largest increase since 2009 due to changes in euro area fiscal policy. The February US jobs report showed Non-Farm Payrolls at 151,000, slightly below the expected 160,000, while the unemployment rate rose to 4.1%.
The Federal Reserve’s pricing remains unchanged, with three 25 basis point cuts anticipated this year, beginning in June. This week is sparse for data, with a focus on Wednesday’s US February CPI and Friday’s Michigan consumer sentiment survey.
Us Dollar Weakness
The broad US dollar is trending weak, with the DXY index recording its largest weekly drop since November 2022. There is an unwinding of long dollar positions as attention shifts towards US cyclical growth.
The euro has found a steady range after last week’s sharp moves, which came on the back of changes in euro area fiscal policy. That was the strongest rise we’ve seen in well over a decade and has left traders reassessing their positions. With the Federal Reserve’s expected rate cuts remaining unchanged and the latest US jobs numbers coming in slightly softer than forecasts, the market is adjusting to what that means for the coming weeks.
Powell and his colleagues still have three rate cuts of 25 basis points each priced in for this year, beginning in June, which keeps expectations anchored. At the same time, the dollar has weakened rapidly, with its largest weekly drop since late 2022. A reversal of long dollar positions is underway as the focus shifts to growth momentum in the US economy.
The calendar this week is light on fresh figures, but Wednesday’s inflation data from the US will be looked at closely for any signs that price pressures are proving stubborn. Friday’s Michigan consumer sentiment survey will also give insight into how American households are feeling about the economy.
Market Volatility Expectations
A sense of caution remains for traders navigating these conditions. The inflation release in particular could challenge market expectations if it comes in hotter than forecast, while a weaker reading would only reinforce bets that easing begins in June. All of this comes as broader market movements continue to digest last week’s adjustments, making positioning decisions more sensitive to surprises in new data releases.
