EUR/USD climbs close to 1.1650 as markets anticipate a dovish stance from the Fed

EUR/USD Extends Winning Streak Amid Softer US Dollar

The EUR/USD pair continued its upward momentum for a seventh consecutive session, hovering near 1.1650 during Monday’s Asian trading hours. The currency pair is benefiting from a weaker US Dollar, as market sentiment leans toward a more dovish stance from the Federal Reserve. Recent US employment data, which came in below expectations, has fueled speculation that the Fed may keep interest rates unchanged at its upcoming meeting.

US Labor Market Data Disappoints

December’s Nonfarm Payrolls (NFP) increased by 50,000, missing both the revised November figure of 56,000 and the anticipated 60,000. Despite the slower job growth, the unemployment rate edged down to 4.4% from November’s 4.6%. Additionally, average hourly earnings rose to 3.8% year-over-year, up from the previous 3.6%.

Fed Officials Weigh In

Tom Barkin, President of the Richmond Fed, welcomed the drop in unemployment and described job creation as steady, though moderate. He noted that hiring remains concentrated in sectors like healthcare and artificial intelligence, and expressed uncertainty about whether the labor market will see more hiring or layoffs in the near future.

Euro Faces Pressure as Inflation Cools

The Euro may encounter renewed headwinds as inflation in the Eurozone continues to ease, reducing the likelihood of further rate hikes by the European Central Bank (ECB). Headline inflation slipped to 2.0% in December, marking a four-month low and aligning with the ECB’s target. Core inflation also softened to 2.3%, slightly underperforming forecasts.

European Security Initiatives in the Arctic

According to Bloomberg, several European countries, including the United Kingdom and Germany, are considering increasing their military footprint in Greenland to bolster security in the Arctic region. Germany is reportedly contemplating a joint NATO operation, while UK Prime Minister Keir Starmer has called on allies to intensify their efforts in the High North. These discussions come as US President Donald Trump reiterates his interest in US ownership of Greenland.