**EUR/USD Surges Amid Disappointing U.S. Jobs Report and Growing Fed Rate Cut Expectations**
*Based on the original article by Sebastian Quinones, FXStreet*
The EUR/USD pair experienced a sharp upward movement on Thursday, August 1, 2025, following the release of unexpected U.S. labor market data. Weaker-than-forecast economic figures reignited investor speculation that the Federal Reserve could be prompted to begin cutting interest rates as early as September. The data, released by the U.S. Department of Labor, showed a rise in jobless claims and a larger-than-anticipated deterioration in continuing claims, indicating a weakening labor market that may encourage the central bank to pivot away from its currently hawkish stance.
This shift in market sentiment placed pressure on the U.S. Dollar, allowing the euro to capitalize, propelling the EUR/USD currency pairing to new weekly highs. Investors are now closely watching upcoming data and central bank commentary to determine if a policy reversal in U.S. monetary policy is becoming imminent.
## U.S. Jobless Claims Signal Cooling Labor Market
The catalyst for the EUR/USD surge was the release of U.S. unemployment data that disappointed markets:
– **Initial Jobless Claims** rose by 10,000 to reach a seasonally adjusted 248,000 during the week ending July 27. This figure exceeded expectations of 235,000 and also followed an upwardly revised 238,000 from the previous week.
– **Continuing Jobless Claims**, which reflect the number of people receiving unemployment benefits on a longer-term basis, increased to 1.895 million for the week ending July 20. This was significantly above consensus expectations of 1.880 million.
These labor market signals reinforced the narrative that the U.S. economy may be losing momentum faster than anticipated by policymakers. A labor market slowdown is particularly significant because Federal Reserve officials have consistently said they need to see sustained weakness in employment before considering cutting the federal funds rate. As a result, traders began ramping up bets on aggressive rate cuts in the coming months.
## Market Reaction: A Weaker Dollar Across the Board
The immediate effect of the soft jobs data was a broad-based decline in the U.S. Dollar. The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major global currencies, dropped below the key psychological level of 102.00. This downturn opened the door for the euro to gain momentum.
– **EUR/USD** broke through multiple resistance levels to touch daily highs approaching 1.0980, the highest level in nearly two weeks.
– The euro found support not only from dollar weakness but also from relatively resilient European data and a less dovish outlook for the European Central Bank (ECB) compared to the Fed.
The encouraging performance of the euro was underpinned by the perception that the ECB may not be as quick to cut interest rates as its American counterpart. Although eurozone growth remains lackluster, inflation in the region has proven sticky in recent months, keeping rate cut expectations subdued.
## Fed Pivot in Focus: September Rate Cut Odds Rise
Traders are now pricing in a much higher probability that the Fed may begin easing its policy stance from its current high levels. According to CME Group’s FedWatch Tool:
– The probability of at least one rate cut by the Fed’s September policy meeting surged above 60% as investors responded to the U.S. jobless claims report.
– For the end of 2025, markets are now anticipating at least two to three rate cuts, with a growing segment of analysts predicting the first cut could come sooner if additional soft data confirm a cooling trend in employment and inflation.
The Federal Reserve has kept interest rates at their current range of 5.25% to 5.50% throughout most of 2025. While recent inflation data have shown signs of stabilization, the labor market had remained relatively strong until this new set of figures
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