EURUSD Consolidates at 1.1050s with EU Unemployment at 6.4%

EURUSD was feeling very strong until this week, but the tables turned upside down for this pair, with fundamentals now supporting the USD and have turned bearish for the Euro. The technical picture also points to a bearish reversal after the failure to break and hold above the 1.12 resistance zone, so it seems like EUR/USD will head below 1.10 soon.

Hawkish comments from Jerome Powell, aimed at pushing back against a 50 basis point rate cut in September, alongside growing support for an ECB rate decrease in October, triggered a reversal in EUR/USD this week. The pair’s upward movement above 1.110 has become costly, particularly with rising tensions in the Middle East and political instability in France.

Yesterday’s eurozone CPI data confirmed the ongoing inflation slowdown, following similar reports from key European economies. Meanwhile, stronger-than-expected US JOLTS job data reinforced the resilience of the US labor market, further reducing recession fears. Weak PMI data and lower inflation readings in the eurozone, combined with dovish signals from ECB President Christine Lagarde, have led markets to price in a 25 basis point rate cut by the ECB in October.

This expectation is weighing on the Euro. The idea that the ECB would be more cautious than the Fed in easing policy is now unraveling, as Powell shows little interest in further aggressive cuts, while inflation data from Germany, France, Spain, and Italy support the case for an ECB rate cut. Given these dynamics, EUR/USD could soon slip back below 1.10.

Eurozone Unemployment Rate

• September EZ Unemployment rate 6.4% vs 6.4% expected
• August Eurozone unemployment rate was 6.4%

Italian Monthly Unemployment Rate

• September Italian Unemployment rate 6.2% vs 6.5% expected
• August Italian unemployment rate was 6.5%, revised to 6.4%

Spanish Unemployment Change

• September employment Change 3.2K  vs 12.1K expected
• August employment change 21.9K

Remarks by ECB vice president, Luis de Guindos

EUR/USD Live Chart