As widely expected, the ECB cut interest rates from 4% to 3.75%, and as mentioned in our market reports, the Bank refrained from confirming more rate cuts are to come, citing that their forecast inflation wont return to its 2% target until 2026.
EUR attempted to gain on the back of this, but gains were limited with markets now guessing when the next rate cut could come. US jobless claims came in higher than expected, highlighting again weakening of the jobs markets ahead of today's non-farm payrolls report.
*Daily move - against G10 rates at 7:30am, 07.06.24
** Indicative rates - interbank rates at 7:30am, 07.06.24
Last month's weaker-than-expected jobs report started off the month-long USD downtrend throughout May, so today's number could once again dictate the direction of travel for the greenback. Markets are expecting a slight pick up in job additions to 185,000 in May, up from 175,000 in April, but there calls from some investment banks to expect another lower-than number, which would follow the soft jobs data we’ve had all week. If so, we would expect markets to firm up the odds of a September cut, and thus see some USD weakness. Otherwise a strong number, and given how much USD has weakened over the last month, we could see demand for USD pick up again ahead of next week's CPI numbers and Fed meeting.
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