The euro surrendered early gains to trade near $1.185 as the US dollar firmed on the back of stronger-than-expected US employment data, which tempered expectations of imminent Federal Reserve rate cuts. Nonfarm payrolls increased by 130,000 in January, the largest monthly rise in more than a year, while the unemployment rate unexpectedly fell to 4.3%. Money markets now fully price in a Fed rate cut by July rather than June, with the probability of a move in March seen at under 5%.
Earlier in the session, the single currency had drawn support from signals that the European Central Bank remains largely unfazed by the euro’s recent appreciation, alongside reports that Bank of France Governor François Villeroy de Galhau, regarded as a dovish policymaker, will step down in June, well ahead of his scheduled term end in October 2027. ECB President Christine Lagarde said last week that the euro area’s inflation outlook is in a “good place,” while cautioning that volatile incoming data should not, on its own, dictate policy decisions.
