Euro Soars to Seven-Week High as Fed Rate Hike Doubts Grow
The Euro to Dollar exchange rate (EUR/USD) has reached a seven-week high above 1.1550 following weaker-than-expected US data, which intensified doubts about the Federal Reserve's ability to deliver the rate hikes previously anticipated by markets.
A decline in non-farm payrolls of 23,000 compared with consensus forecasts of an increase of around 85,000 has added to the uncertainty surrounding the Fed's interest rate decisions. The US employment report also showed a decrease in the unemployment rate to 4.1% from 4.2%, but this was largely due to another decline in the participation rate.
Analysts at MUFG forecast that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.20 by the second quarter of 2027, while Standard Chartered expects a retreat to 1.13 on a three-month view before a medium-term recovery. Meanwhile, CIBC predicts medium-term dollar losses, citing the Fed's decision to skip July as crucial to their USD lower view.
ING commented that today's outcome supports their call for a prolonged pause from the Federal Reserve, but emphasized that ahead of the September FOMC meeting, there are still several key events to consider. MUFG noted underlying Fed dynamics, highlighting perceptions of a reluctance to hike and division between the Board of Governors and regional Presidents.