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As rising risk aversion triggered a stronger dollar, the euro expanded its losses against the dollar for the second consecutive day, trading around 1.0890 during the Asian session on Friday.
Rising U.S. Treasury yields have boosted the dollar, but weak labor data could limit the greenback’s upside potential as they bolster expectations for a rate cut by the Federal Reserve in September.
Data released on Thursday showed that the number of people applying for unemployment benefits for the first time in the United States increased more than expected. There were 243,000 new applicants for unemployment benefits in the week ended July 12, which was higher than the 230,000 expected and higher than the revised 223,000 the previous week.
According to CME Group’s FedWatch Tool, markets currently indicate a 93.5% chance of a 25 basis point rate cut at the September meeting, up from 85.1% a week ago.
In the euro, the European Central Bank (ECB) decided to keep the main refinancing rate unchanged at 4.25% at its July monetary policy meeting on Thursday, as expected. The ECB’s deposit facility rate was also kept unchanged at 3.75%.
According to Reuters, at a press conference after the interest rate decision, European Central Bank President Christine Lagarde said: “The question of September and what we do in September is open.” Gard also noted that the monetary policy decision was unanimous and stressed the central bank’s commitment to relying on a range of data rather than any single data point.
