EUR/USD Hanging in There

Core Viewpoint - The EUR/USD exchange rate has shown resilience despite potential pressures from US economic data and Federal Reserve signals, indicating a delay rather than a complete abandonment of expectations for rate cuts [1][2][3]. Economic Indicators - A strong US jobs report indicated a rise in headline jobs growth, with the unemployment rate increasing due to a larger labor force, yet the dollar softened, suggesting better-balanced positioning among investors [2][3]. - The market is currently pricing the next Federal Reserve rate cut for January at 24 basis points, compared to 10 basis points for December, reflecting a shift in expectations [3]. European Economic Outlook - The eurozone is showing signs of stability, with business sentiment remaining constructive, which may support the euro against the dollar [6]. - The European Central Bank (ECB) is expected to report negotiated wages for Q3 at an annualized rate of 2.45%, down from 3.95% in the previous quarter, indicating rising real wages and potential positive consumption surprises in 2026 [6]. Central Bank Activities - ECB President Christine Lagarde is set to speak at the Frankfurt European Banking Congress, focusing on the benefits of investing in Europe and possibly discussing the expansion of EUREP repo lines to enhance euro invoicing [7]. - The Swiss National Bank is expected to maintain a cautious stance regarding the strength of the Swiss franc, with limited options for rate cuts or interventions [9]. Japanese Economic Policy - Japan is implementing targeted fiscal stimulus aimed at energy subsidies, which may help lower headline inflation and keep the Bank of Japan from raising rates, potentially leading to more negative real rates and a weaker yen [10]. - There is an increasing likelihood of intervention in the USD/JPY exchange rate if it approaches the 159/160 range, particularly during the US Thanksgiving holiday when market conditions are thinner [11].