EUR/USD slides as stronger US labor data boosts Greenback

• EUR/USD slips below 1.1700 during the American trading hours after two days of rangebound movement between 1.1700 and 1.1750.
• US Initial Jobless Claims fall to 227K, surprising markets with a fourth straight weekly decline and signaling continued labor market strength.
• ECB expected to hold rates in July, though markets still price in one more cut this year amid soft Eurozone growth.

The Euro (EUR) weakens against the US Dollar (USD) on Thursday as the Greenback edges higher following stronger-than-expected US weekly labor data, which reinforced confidence in the resilience of the labor market. However, market sentiment remains cautious amid persistent tariff threats from Washington and ongoing trade negotiations with the European Union(EU).

EUR/USD slips below the 1.1700 mark after two days of rangebound trading between 1.1700 and 1.1750. At the time of writing hovering around 1.1687 during the American trading session.

Initial Jobless Claims in the United States declined by 5,000 to 227,000 for the week ending July 6, defying market expectations for a rise to 235,000. This marks the fourth straight weekly decline and the lowest reading in nearly two months, offering fresh evidence that the labor market remains sturdy despite high interest rates and persistent trade-related uncertainty. The data offered a lift to the US Dollar, as traders scaled back bets on near-term rate cuts by the Federal Reserve.

That said, Continuing Jobless Claims rose by 10,000 to 1.965 million, hitting their highest level since late 2021. This divergence suggests that while layoffs remain low, rehiring may be slowing, pointing to some underlying slack in the labor market even as headline figures remain solid.

On the trade front, the United States and the European Union are inching closer to a deal as they race to finalize an agreement before the August 1 deadline. EU Trade Chief Maroš Šefčovič said "good progress" had been made and signaled that a framework deal could be reached in the coming days. The potential agreement may include a base tariff of around 10%, with special exceptions for important products like Airbus aircraft. While the US has already pushed back its original deadline, President Donald Trump has warned there will be no further delays. He has already started sending formal tariff letters to other countries, adding pressure to EU negotiators.

European Commission President Ursula von der Leyen has reiterated the EU's "non-stop" efforts to secure an "agreement in principle" that would offer stability for businesses, acknowledging that tariffs are a "lose-lose" scenario. However, divisions persist within the EU. Germany is pushing for a quick, targeted deal to protect its auto exports, while countries like France, Spain, Italy, and Denmark favor a more comprehensive and balanced trade framework.

On the monetary policy front, the European Central Bank (ECB) is widely expected to leave interest rates unchanged at its July meeting. However, market participants still believe that the ECB could cut rates at least once more before the end of the year, as inflation remains near target and economic growth stays fragile across the Eurozone.