The EURUSD currency pair is pulling back from its highest levels in more than six weeks, trading at 1.1655 early on Thursday, yet holding most of the ground taken on an eight-day rally.
The US dollar has ticked up from its lows, with markets in a calm session, while investors’ focus shifts to the Eurozone Retail Sales and US Initial Jobless Claims figures, later in the day.
The EUR rushed higher on Wednesday after the Eurozone HCOB Services Purchasing Managers’ Index reported that the sector’s activity grew at its fastest pace in more than two years, with manufacturing data in France and Germany, the region’s leading economies, also beating expectations.
US economic data, on the contrary, failed to cheer investors, especially the ADP Employment Change report, which showed an unexpected loss in net jobs, adding to evidence of the deteriorating labour market and cementing hopes that the Federal Reserve will cut interest rates by 25 basis points next week.
Markets are also pricing a more dovish Fed chairman to replace Jerome Powell at the end of his term, in May 2026. With White House economic advisor Kevin Hassett emerging as the best positioned for the job, investors are starting to consider the possibility of a steep monetary easing cycle next year, which is weighing heavily on the Greenback.
Meanwhile, the EURUSD pair may rise as markets price in a December Fed rate cut, with structural factors and energy markets providing additional support. European natural gas prices have fallen to their lowest since early 2024, enhancing Euro competitiveness — but cold weather could tighten markets and reverse gains, Danske Bank’s FX analyst Kirstine Kundby-Nielsen reports.
“We now expect the Federal Reserve to cut interest rates in December. It means structural drivers could take the forefront again and start push EUR/USD higher,” the Danske Bank analyst added.
“EURUSD is also getting support from an unexpected side, namely the natural gas market. The European natural gas price has dropped to the lowest level since early 2024 and the spread to US natural gas prices has narrowed to the tightest level since 2021. This is good news for EURUSD as European manufacturers regain competitiveness, while US energy exporters lose revenue.”
“European natural gas storages are low for this time of year; hence, this benign environment for EURUSD could end if the temperature suddenly drops in Europe and the need to draw down inventories rise leading to tighter market conditions and a rebound in European prices.”
EURUSD charts by TradingView
(Source: OANDA)
