EUR/USD climbed to an 8-session high on Thursday, driven by a sharp decline in the U.S. dollar and interest rates after disappointing economic data reduced expectations for a near-term Federal Reserve interest rate hike. June non-farm payrolls came in well below expectations at 57k, versus estimates of 110k, while May's figure was revised down significantly from 172k to 129k. The labor force participation rate also slipped to 61.5%, signaling that the U.S. labor market is cooling rather than overheating.

Combined with expectations for moderating inflation , the weak jobs data pushed U.S. yields and short-term rates lower as markets repriced Fed policy. Investors have now shifted their rate hike expectations from late 2026 to early 2027, suggesting the dollar may struggle to find upward momentum in the near term. This was reflected in a tightening of the U.S.-German 2-year yield spread and a rally in March 2027 SOFR futures — moves that, if sustained, would further weigh on the dollar relative to the euro.

From a technical perspective, the persistent shift toward a delayed rate hike timeline could bring EUR/USD's downtrend from its January high to an end. The pair may now enter a more range-bound phase over the summer months, with traders eyeing a broad trading zone between 1.1300 and 1.1800.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)