EUR/USD steadies as ECB hawkishness offsets Fed ahead of NFP

EUR/USD held around 1.1610 on Friday as traders priced in further European Central Bank rate increases ahead of the US May Nonfarm Payrolls release. The NFP report for May is forecast to show about 85,000 jobs added and a 4.3% unemployment rate.

Market pricing points to an ECB rate rise next week that would lift the deposit rate to about 2.25%. At the same time, futures show the Eurozone-US implied policy rate gap for August 2026 narrowing to roughly -1.28% from around -1.45% in June, reflecting expectations of additional ECB tightening.

Federal Reserve expectations are more restrained. Fed funds futures imply about a 60% probability of a 25 basis-point hike by December 2026 under incoming Fed leadership. Recent US data have been mixed: private payrolls and job openings were stronger while weekly jobless claims rose to about 225,000, leaving the dollar slightly softer in recent sessions.

Technical indicators show EUR/USD trading in a narrow band near 1.1610–1.1620 after forming a small base above the lower boundary of a medium-term ascending channel that began on March 13. Hourly momentum measures have moved higher after finding support on an upward trendline. Immediate resistance is at 1.1645–1.1660, followed by 1.1685 and 1.1720. Near-term support sits around 1.1610 and 1.1595, with a medium-term pivot near 1.1580 and congestion near 1.1555.

An OANDA analysis by Kelvin Wong noted the narrowing policy gap and the formation of a minor base above 1.1580. Market participants say incoming US labour data will be the principal driver for the next 24 to 72 hours, with price action expected to react to the headline payroll number and any subsequent revisions.

A US jobs print significantly above forecasts would tend to strengthen the dollar, while a weaker print would tend to weaken it. On the Eurozone side, confirmation of further ECB tightening would steepen the policy rate differential versus the United States.