• EUR/USD is entering a bearish consolidation phase after last week’s decline to the mid-1.0900s.
• USD holds post-NFP gains to a multi-week high and limits the pair’s advantage.
• Bets on another ECB interest rate cut in October weaken the euro and further hamper the euro.

EUR/USD starts the recent week on a subdued note, consolidating last week’s hefty losses to its lowest level since mid-August, which came on Friday after upbeat US employment details. Spot prices are currently hovering around 1.0975 and appear vulnerable to an extension of the recent acute decline from a 14-month high – levels just above 1.1200.

The US dollar (USD) is holding near a seven-week high as investors continued to reduce their stance on another excessive interest rate cut by the Federal Reserve (Fed) in November on surprisingly robust US jobs data. The main NFP showed that in September 254,000 jobs were created in the economy. jobs, far exceeding consensus estimates, and the unemployment rate unexpectedly fell to 4.1%. This shows that the US labor market remains resilient, and stronger-than-expected growth in average hourly earnings has revived concerns about inflation, dashing hopes for more aggressive Fed easing.

In fact, current market prices indicate a nearly 95% chance that the Fed will cut borrowing costs by 25 basis points at the end of its two-day policy meeting on November 7. Adding to this, persistent geopolitical risks arising from ongoing conflicts in the Middle East helped the USD Index (DXY), which tracks the dollar against a basket of currencies, to register a betting week from September 2022. On the other hand, the single currency continues to be weakened by bets that the Central Europe Bank (ECB) will cut interest rates again in October as inflation pressures ease and the economy slows down.

Expectations were confirmed by statements by Francois Villeroy de Galhau, a member of the ECB’s Governing Council, who said that the central bank would cut interest rates in October because faint economic growth increases the risk that inflation will fall below the 2% target. This, in turn, is seen as another depressing factor for the EUR/USD pair and supporting the prospects of a further short-term depreciation move. Therefore, any attempt to revive the situation may still be seen as a selling opportunity and carries the risk of expiring quickly.