Euro shrugs off weak German data and pares losses amid an improved risk mood 

The Euro (EUR) appreciates about 0.4% against the US Dollar (USD) on a calm week opening, and a mild appetite for risk, which has offset the downbeat German Trade Balance data released earlier on Monday. The EUR/USD pair is trading at the 1.1190 area at the time of writing, up from Friday’s high at 1.1130.

A mild optimism prevails at the week's opening, with the main European equity indexes showing moderate advances, as AI fears have eased, at least for now, and diplomatic efforts to end the Middle East conflict continue. Brent Oil prices consolidate below the key $100 level, which provides important relief to the Eurozone’s Oil-importing economies.

The positive market sentiment has offset the downbeat German Trade Balance figures seen earlier on Monday. Data released by Destatis revealed that the trade surplus narrowed to EUR 15.6 billion in September, from EUR 17.8 billion in August, against expectations of a EUR 19.2 billion surplus, as imports increased well above exports.

The safe-haven USD dives despite strong NFP data and Fed tightening hopes

In the US, Nonfarm Payrolls data released on Friday beat expectations, with net jobs increasing by 165K, overshooting the market consensus of a 65K growth, and the Unemployment rate declining to 4.1%.

These figures have strengthened market expectations that the Federal Reserve (Fed) will hike interest rates again at its December meeting, a view that was backed by New York Fed President John Williams, St. Louis Fed President Alberto Musalem, and San Francisco Fed President Mary Daly later in the day.

Analysts at Commerzbank Research observe that “of the 18 Fed officials who submitted projections for the appropriate path of interest rates in September, 16 anticipated at least one more rate hike this year (...) “the data released since then are unlikely to have changed that assessment materially,” says the bank in a note.

Fed hike expectations underpinned by solid us labor market

Analysts at Commerzbank Research argue that recent data leave the Federal Reserve with room to tighten policy further, noting that “on balance, the U.S. labor market remains solid and poses no obstacle to further interest rate hikes.” The bank points out that “of the 18 Fed officials who submitted projections for the appropriate path of interest rates in September, 16 anticipated at least one more rate hike this year,” and judges that “the data released since then are unlikely to have changed that assessment materially.”