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The EUR/USD pair is charging toward 1.1332, gaining 0.42% during Friday’s North American trading session, fueled by a potent mix of sizzling Eurozone inflation and a robust US jobs report. A tumbling US Dollar, spurred by President Donald Trump’s push for lower interest rates, has given the Euro room to shine. But with trade talks simmering and monetary policy expectations shifting, the pair’s rally faces hurdles. Here’s why the Euro is soaring, what’s capping its gains, and what’s next for this volatile market.
Eurozone Inflation Heats Up
April’s Eurozone Harmonized Index of Consumer Prices (HICP) delivered a jolt, with core HICP surging to 2.7%, topping forecasts of 2.5% and March’s 2.4%. Headline HICP climbed 2.2% annually, beating expectations of 2.1%, while monthly figures showed headline and core HICP up 0.6% and 1.0%, respectively. This hotter-than-expected data bolsters the Euro, signaling persistent price pressures. Yet, the European Central Bank, under President Christine Lagarde, remains cautious, prioritizing economic slowdown risks from Trump’s tariffs over inflation spikes. Markets still anticipate a 25-basis-point rate cut in June, reflecting confidence that inflation will ease toward the 2% target.
US Jobs Data and Trump’s Rate Cut Call
The US Nonfarm Payrolls (NFP) report added 177,000 jobs in April, smashing estimates of 130,000, though slightly below March’s revised 185,000. The unemployment rate held at 4.2%, and wage growth softened, with average hourly earnings up 0.2% monthly and 3.8% annually, below forecasts of 0.3% and 3.9%. This resilience should support a steady Federal Reserve policy under Chair Jerome Powell, but Trump’s post-NFP Truth Social post demanding rate cuts—citing low gasoline prices, falling grocery costs, and tariff-driven revenue—has muddied the waters. The CME FedWatch tool now shows a 41% chance of a June rate cut, down from 58%, with May’s 4.25%-4.50% range likely unchanged. The US Dollar Index slid below 99.50, amplifying the Euro’s 0.42% surge in the North American session.
Trade Talks Add Complexity
Hopes of a US-China trade war thaw are stirring markets. China’s Commerce Ministry signaled openness to talks, urging US sincerity, while Trump expressed optimism about deals with China, South Korea, Japan, and India. This should bolster the Dollar by easing fears of tariff-driven price hikes, yet Trump’s rate-cut rhetoric has overshadowed these gains, weakening the Greenback. The EUR/USD’s rally, up 0.42% in North American trading, reflects this Dollar softness, but trade progress could cap the pair’s upside if it restores US currency strength.
Technical Outlook and What’s Ahead
At 1.1332, the EUR/USD is testing resistance near 1.1377, with support at 1.1295 and 1.1318. The bullish trend, backed by upward-sloping moving averages, remains intact, but fading momentum—evident in neutral RSI and negative MACD—suggests caution. Next week’s Eurozone PMI and US ISM data will clarify economic trajectories, while trade talk developments could swing sentiment. For now, the Euro’s 0.42% surge is a bet on inflation and Dollar weakness, but traders should brace for choppy waters as policy and geopolitics collide.
