Euro Edges Higher as Weak US Labor Data Dampens Rate Hike Bets

The Euro has edged higher against major currencies as weak US labor data and lower oil prices temper bets on a Federal Reserve interest rate hike in September. The ADP Employment Change report showed that non-farm payrolls rose by only 44,000 in July, missing expectations of 70,000 and slowing from the previous month's 98,000. This data follows Tuesday's weaker-than-expected JOLTS Job Openings report.

The ISM Services Purchasing Managers Index (PMI) edged up to 54.1 in July from June's 54, but fell short of the 54.5 market forecast. The CME FedWatch Tool now prices in a 56% chance of a September rate hike, down from 67% the previous day.

Attention turns to Friday's Nonfarm Payrolls report for fresh clues about the US labor market. Strategists at Brown Brothers Harriman note that recent communications from the FOMC suggest participants 'broadly agree that the labor market is in balance but are more divided over the durability of the inflation threat.'

Oil prices remain under pressure as hopes build that the Strait of Hormuz could reopen soon, with an announcement possible as early as Wednesday. Lower oil prices reduce inflation risks, although US inflation is still running above the Fed's 2% target.