The euro rebounded against the dollar on Friday after initially hitting a low of 1.0877, with EUR/USD later turning positive and reaching a high of 1.1000. Investors believe U.S. jobs data indicates slowing that will lead the Fed to cut rates.
December non-farm payrolls topped estimates but large downward revisions to previous months reinforced cooling in the labor market. After the dollar initially spiked, spreads between German and U.S. 2-year yields tightened the closest since November.
Though trimming expectations for the timing of the first Fed cut, investors still see more easing than Fed projections.
Attention now turns to the U.S. December CPI report next week, with forecasts for slowing inflation on a monthly and yearly basis. An in-line or lower print could spur further euro gains by tightening yield spreads and validating dovish Fed views.
