EUR/USD weakens to 1.0780 ahead of German Trade Balance, Eurozone PMI data

The EUR/USD pair faces some selling pressure above the mid-1.0700s during the early Asian trading hours on Monday. The US Dollar Index (DXY) edges higher as the Federal Reserve (Fed) Chair Jerome Powell pushed back on the timing of rate cuts. The major pair currently trades around 1.0772, down 0.19% on the day. 

Late Sunday, Fed Chairman Jerome Powell said a rate cut in March is too soon as he doesn’t believe the FOMC will have the confidence by then that inflation is heading back to 2% sustainably. Powell added that policymakers see it appropriate to cut rates this year, but it is prudent to be open to the possibility of rates falling from spring onwards. The US central bank will discuss at the March meeting about the timing of easing the pace of quantitative tightening (QT).

According to the US Bureau of Labor Statistics on Friday, the Nonfarm Payrolls (NFP) rose by 353K in January, above expectations for a 185K increase in the previous reading. Meanwhile, the Unemployment Rate was unchanged at 3.7%. Finally, wage growth is firming, with Average Hourly Earnings climbing 4.5% YoY in January from the previous reading of 4.4% in December. 
 
On the other hand, European Central Bank (ECB) Governing Council member Boris Vujcic said on Sunday that the central bank needs to ensure there aren’t any second-round effects on inflation from wages before cutting interest rates.
Investors will keep an eye on the German Trade Balance and the January HCOB Composite PMI from Germany, the Eurozone and Spain. On the US docket, the ISM Services PMI will be due.