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EUR/USD weakened to around 1.0575 during early European trading on Friday. Heightened concerns about U.S. tariffs on European goods, as well as rising bets on an interest rate cut by the European Central Bank (ECB), weighed on the pair. Later on Friday, the U.S. non-farm payrolls (NFP) report will be in focus.
The euro remained on the defensive as traders worried about possible tariffs on all goods entering the United States, which could damage the euro zone economy. In addition, the market generally expects the European Central Bank to cut interest rates at its last monetary policy meeting this year. All but two of 75 economists polled by Reuters expect the ECB to cut its deposit rate by 25 basis points (bps) on December 12.
Elsewhere, according to Reuters, French President Macron said on Thursday that he will appoint a new prime minister in the next few days, and his first task will be to get the 2025 budget passed by parliament. Any signs of political uncertainty in France could contribute to the euro’s downside.
Across the pond, expectations that the Federal Reserve (FED) will cut borrowing costs at its December policy meeting could weigh on the dollar and limit the downside for EUR/USD. Markets are currently pricing in a 70.1% chance of a quarter-point rate cut by the central bank at its Dec. 17-18 meeting, according to the CME FedWatch tool.
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