The euro settled near six-week highs against the dollar before an expected ECB interest rate cut on Thursday, while the US dollar rebounded mildly after weak labor data. 

Recent data showed the US services sector shrank for the first time in a year, while the labor sector is showing signs of weakness as well, leading to a wave of US treasury notes purchases and boosting the odds of multiple Fed rate cuts this year.

The dollar index is up 0.37% today against the yen at 143.34, while rising 0.25% on  the Swiss franc to 0.82025.

The euro is little changed at $1.1416, approaching a six-week high, while the pound steadied as well at $1.3565.

Markets are on edge before the European Central Bank’s likely decision today to cut interest rates by 0.25%, the eighth such cut in 13 months, as eurozone inflation backs off recent highs.

The latest eurozone data showed consumer prices fell below the 2% ECB target, bolstering the odds of a rate cut.

Jobs Data

Markets await the crucial US payrolls report on Friday after the ADP index showed the private sector added far less jobs than expected last month.

The official government report is expected to show the addition of 130 thousand new jobs in May, and for unemployment to remain steady at 4.2%.

The markets were in turmoil since Trump’s aggressive reciprocal tariffs in early April, before freezing many of them and announcing new ones, sending investors away from US assets. 

The dollar’s weakness has been the main talking point in these weeks, with economists polled by Reuters expecting even more losses for the greenback amid persistent concerns about the US federal budget deficit.

The dollar index is down 9% so far this year to 98.87, and is heading for the worst yearly performance since 2017.

Trump Calls for Rate Cuts

US President Donald Trump intensified his public pressures on Fed Chair Jerome Powell to cut interest rates, and compared the slow pace of the Fed to the rapid rate cuts by the ECB.

Minneapolis Fed President Neil Kashkari acknowledged weakness in the labor sector but asserted the importance of more data before changing monetary policies. 

Gold prices rose in European trade on Thursday, approaching four-week highs as the dollar lost ground against major rivals.

Investors await a slew of crucial US labor data this week, which would provide clues on the future of the Fed’s interest rates this year.

Prices

Gold prices rose 0.4% today to $3384 an ounce, with a session-low at $3361.

On Wednesday, the precious metal rose 0.6%, resuming gains and approaching a four-week high at $3392.

US Dollar

The dollar index fell 0.15% on Thursday, extending the losses for the second straight session and approaching a six-week trough against a basket of major rivals.

The decline comes amid uncertainty about the US-China trade talks, and following weak US labor data, which boosted the odds of multiple Fed rate cuts later this year.

US Rates

Earlier US data showed the services sectors shrank for the first time in a year, while the private sector added far less jobs than expected last month.

According to the Fedwatch tool, the odds of a Fed 0.25% June interest rate cut stood at 2%, while the odds of a July rate cut stood at 24%.

Now traders expect 50 basis points of US rate cuts overall this year, starting October.

SPDR

Gold holdings at the SPDR Gold Trust remained unchanged yesterday at 935.65 tons, the highest since May 13.

The euro rose in European trade on Thursday against a basket of major rivals, extending gains against the dollar for the second session and approaching a six-week high ahead of the European Central Bank’s policy meeting. 

The ECB is expected to announce the seventh consecutive rate cut in a row and could provide clues on the path ahead for policies in the second half of the year.

The Price

The EUR/USD price rose 0.15% today to $1.1417, with a session-low at $1.1404.

The euro closed up 0.4% on Wednesday against the dollar, approaching a six-week high at $1.1454.

Eurozone Inflation

Recent official data showed the eurozone inflation below the ECB’s 2% target, showcasing the receding inflationary pressures on policymakers.

The ECB is scheduled to wrap up its policy meeting today, and will likely cut interest rates by 25 basis points to 2.15%, the lowest since October 2022, and the seventh such cut in a row.

ECB President Christine Lagarde is scheduled to hold a press conference right after the meeting to provide the overall official opinion on policies and the outlook.

The yen rose in Asian trade on Thursday against a basket of major rivals, extending gains for the second straight day against the US dollar amid active haven demand with mounting global trade uncertainty.

Recent Japanese consumer prices data showed increasing inflationary pressures on the Bank of Japan’s policymakers, boosting the odds of a rate hike in June.

The Price

The USD/JPY price fell 0.2% today to 142.53 yen per dollar, with a session-high at 142.97.

The yen rose 0.85% on Wednesday, the fourth profit in five sessions following weak US jobs data for May.

Trade Developments

US President Donald Trump described Chinese President Xi Jinping as a difficult man to make a deal with, exposing existing tensions between both sides ahead of an anticipated phone call.

Japanese Rates

Earlier data showed consumer prices in Tokyo rose 3.6% y/y in May, the fastest pace since January 2023, and up from 3.4% in April.

Following the data, the odds of a BOJ 0.25% interest rate hike in June rose from 35% to 45%.

Bank of Japan Deputy Governor Shinichi Uchida said the bank will continue to raise interest rates if the economy recovers from the negative impact of US tariffs, however he still cautioned that the economic outlook remains highly uncertain.

Now traders await more Japanese data on inflation, unemployment, and wages to gather additional clues.

US Rates

Earlier US data showed the services sectors shrank for the first time in a year, while the private sector added far less jobs than expected last month.

According to the Fedwatch tool, the odds of a Fed 0.25% June interest rate cut stood at 2%, while the odds of a July rate cut stood at 24%.

Now traders expect 50 basis points of US rate cuts overall this year, starting October.