The EUR/USD pair advances toward 1.1915 in early European trading on Wednesday, supported by a softer US Dollar. Investors are likely to adopt a cautious stance later in the session as they await the delayed US January employment report, which could shape expectations around Federal Reserve policy.
Disappointing US Retail Sales figures weighed on the Greenback and provided support to the pair. According to data released by the US Census Bureau on Tuesday, Retail Sales were flat at $735 billion in December, following a 0.6% increase in November. The result fell short of market expectations for a 0.4% rise. On an annual basis, Retail Sales grew by 2.4% in December, down from 3.3% previously.
Cleveland Fed President Beth Hammack stated that interest rates may remain unchanged for an extended period as policymakers assess incoming data. Dallas Fed President Lorie Logan added that while inflation is expected to ease further, she would require clear signs of significant weakness in the labor market before backing additional rate cuts.
Economists forecast that US Nonfarm Payrolls increased by 70,000 in January, with the Unemployment Rate seen holding steady at 4.4%. Stronger-than-expected labor market data could lend fresh support to the US Dollar against the euro in the near term.
In the Eurozone, the European Central Bank kept its key interest rate unchanged at 2.0% for the fifth consecutive meeting last week, in line with expectations. During her press conference, ECB President Christine Lagarde emphasized that the central bank would continue to rely on incoming data and make decisions on a meeting-by-meeting basis, without committing to a specific rate trajectory. A large majority of economists surveyed by Reuters in January expect the ECB to maintain current interest rates throughout the remainder of 2026.
