No significant events are expected today.

The EUR/USD pair starts the new week on a cautious note, consolidating last week’s significant losses to its lowest level since mid-August, reached amid positive U.S. employment data on Friday. The pair is currently trading around 1.0970.

The U.S. dollar (USD) is near a seven-week high as traders have further reduced their bets on another substantial interest rate cut by the Federal Reserve (Fed) in November following unexpectedly strong U.S. jobs data. The key NFP report showed that the economy added 254,000 jobs in September, significantly exceeding consensus estimates, while the unemployment rate unexpectedly fell to 4.1%. This indicates that the U.S. labor market remains resilient, while higher-than-expected growth in average hourly earnings has revived inflationary concerns, dashing hopes for more aggressive easing by the Fed.

In fact, current market pricing indicates nearly a 95% probability that the Fed will cut borrowing costs by 25 basis points following the two-day meeting on November 7. Additionally, ongoing geopolitical risks caused by continuing conflicts in the Middle East have helped the U.S. Dollar Index (DXY), which tracks the dollar’s value against a basket of currencies, register its lowest week since September 2022. On the other hand, the euro continues to be undermined by expectations that the European Central Bank (ECB) will lower rates again in October amid easing inflationary pressures and slowing economic growth.

These expectations were confirmed by comments from ECB Governing Council member François Villeroy de Galhau, who stated that the central bank would cut rates in October, as weak economic growth increases the risk that inflation will not reach the 2% target. This, in turn, is seen as another factor acting as a headwind for the EUR/USD pair, supporting the prospect of further declines in the near term. Therefore, any recovery attempts could be seen as selling opportunities and are likely to fade quickly.

Recommendations: Watch for the 1.0940 level, and consider Sell positions if it holds below.