EUR/USD Holds Steady as US Yields Ease

The euro edged slightly higher against the US dollar during Thursday's Asian trading session (Sept 3), as the greenback lost some momentum following gains in recent sessions. EUR/USD traded around the US$1.158–US$1.159 range while investors awaited a series of US economic data releases that could shape the Federal Reserve's policy direction.

Pressure on the dollar mounted after US Treasury yields retreated from their highs, while weaker-than-expected US private-sector employment data raised concerns about the labor market's health. These conditions allowed the euro to stage a recovery, although gains have remained limited so far.

In Europe, market attention today is focused on the release of services sector PMI figures for major economies, including Germany, France, Italy, and the Eurozone as a whole. The Eurozone services PMI is expected to come in around 51.7, while the Composite PMI is projected at approximately 52.1. Data indicating continued economic expansion could provide further support for the euro.

However, the euro continues to face headwinds from the inflation outlook and the divergence in monetary policy between the European Central Bank and the Federal Reserve. Should US economic data demonstrate resilience particularly in the services sector and labor market expectations for higher Fed interest rates could strengthen, thereby supporting the dollar.

On the US front, investors are awaiting initial jobless claims, forecast at around 205,000, and the ISM Non-Manufacturing PMI, expected to hold steady near 54.1. Stronger-than-expected data could boost the dollar, whereas weaker results might push EUR/USD higher.

The primary focus remains on Friday's US Nonfarm Payrolls report. This data will serve as a crucial indicator of whether labor market weakness is broadening or merely transitory. Until then, EUR/USD is likely to trade cautiously, with volatility potentially rising ahead of this key slate of US data. (CP)