EUR/USD settles below 6-week high, posts weekly gain

The EUR/USD currency pair settled below recent high of 1.1495, its strongest level since April 22nd, in the wake of the European Central Bank’s policy decision and as US job market resilience tempered Fed rate cut expectations.

Employers in the United States added 139,000 jobs in May, representing a slight pullback from April’s downwardly revised growth of 147,000 positions. The latest figure came in ahead of the 130,000 job increase forecast by economists surveyed by Reuters, but still signaled a cooling in hiring activity.

The US unemployment rate remained flat at 4.2%. This aligned with economists’ expectations and suggested a still-resilient labor market.

The jobs data prompted traders to scale back expectations for aggressive monetary easing. Market pricing now suggests that the Federal Reserve is unlikely to take action on interest rates before September.

Meanwhile, the ECB lowered all three of its benchmark interest rates by 25 basis points:

– the main refinancing operations rate to 2.15%;
– the deposit facility rate to 2.00%;
– the marginal lending rate to 2.40%.

The policy decision reflected updated inflation and GDP forecasts.

Euro Area’s headline inflation is forecast at 2.0% in 2025 (compared to 2.3% in the prior projection), at 1.6% in 2026 (compared to 1.9% in the prior projection) and at 2.0% in 2027.

Core inflation is projected at 2.4% in 2025 before easing to 1.9% in 2026.

And, GDP growth is projected at 0.9% in 2025, at 1.1% in 2026 (compared to 1.2% in the prior forecast) and at 1.3% in 2027, driven by higher real incomes, strong labor markets and rising government investment.

During the post-meeting press conference, ECB President Christine Lagarde said that the central bank was moving closer to the end of its easing cycle, indicating a potential pause after this week’s cut.

The EUR/USD currency pair settled 0.45% lower at 1.1392 on Friday.

The major Forex pair gained 0.41% for the week.