Euro nudges higher above 1.1350 on softer Fed stance, traders await US jobs data

The EUR/USD pair posts modest gains near 1.1380 during the early Asian session on Thursday. The US Dollar (USD) edges lower against the Euro (EUR) on less hawkish remarks from Federal Reserve (Fed) Chairman Kevin Warsh. Traders will closely monitor the US jobs data for June later on Thursday.

Fed’s Warsh, on Wednesday at the ECB Forum on Central Banking, declined to give any signal as to what the central bank may do at its July policy meeting but did note that inflation was too elevated. He emphasized commitment to central bank independence and a 2% inflation target.

Warsh reiterated his preference for the central bank to scale back its bond portfolio, while highlighting that any such step will only be made after extensive public preparation.

“At a minimum, his comments provided no fuel for speculation on a near-term July rate hike, and in our view suggest the new Fed chair – while keeping all options open meeting by meeting – does not currently see cause for an immediate hike,” said Krishna Guha at Evercore.

On the other hand, signs of softer inflation in the Eurozone could prompt traders to reduce bets on the European Central Bank (ECB) rate hikes. This, in turn, might cap the upside for the shared currency. Eurozone inflation, as measured by the Harmonized Index of Consumer Prices (HICP), fell to 2.8% YoY in June from 3.2% in May, Eurostat showed on Wednesday. This figure came in softer than the market expectation of 3.0%.

Meanwhile, the core HICP inflation, which excludes volatile food and fuel prices, slowed to 2.4% YoY in June from 2.6% in the previous reading, below the market consensus of 2.6%.