Geopolitical risks in the Strait of Hormuz drive demand for the euro despite robust US employment figures limiting Fed rate cut expectations.
EUR/USD climbed to 1.1775 during the North American session, reversing earlier losses as escalating tensions in the Middle East took precedence over economic data. The pair rose despite a solid US jobs report, which had initially dampened expectations for Federal Reserve rate cuts in the first half of the year.
Prior to the report, markets had priced in a higher probability of a Fed rate reduction by mid-2024. However, the stronger-than-expected employment figures suggested a resilient US economy, typically a hawkish signal for the dollar. The shift in focus to geopolitical risks in the Strait of Hormuz provided support for the euro, a traditional safe-haven currency in times of uncertainty.
No immediate market reaction data was provided, but the move highlights investor sensitivity to geopolitical developments amid mixed economic signals.