EUR/USD extends gains near 1.0520, focus on US Jobless Claims

• EUR/USD recovers on the correction in the Greenback.
• ECB is expected to hold interest rates in the upcoming policy meeting.
• US Dollar continues to lose due to a pullback in US Bond yields.

EUR/USD continues on the gains registered in the previous session, trading higher around 1.0520 during the Asian trading session on Thursday. The pair encountered challenges amid market caution regarding the interest rate trajectory of the US Federal Reserve (Fed).

Furthermore, the upbeat Eurozone’s HCOB Purchase Manufacturing Index (PMI) on Wednesday might provide support for the Euro. The report revealed that the Composite PMI for September improved from 47.1 to 47.2, which was expected to remain consistent.

German Composite PMI showed a reading of 46.4, which was 46.2 prior. Services PMI improved to 50.3, exceeding the market consensus of 49.8. However, Retail Sales (YoY) fell 2.1%, exceeding the expected 1.2% decline.

European Central Bank (ECB) is expected to keep interest rates unchanged at 4.50% in the upcoming meeting later in the month. On Wednesday, ECB Governing Council member Mario Centeno noted that inflation in the Euro area is decreasing faster than its earlier ascent, indicating that the rate cycle may have concluded under current conditions.

Additionally, ECB Vice President Luis de Guindos emphasized the bank's commitment to a data-dependent approach.

The US Dollar Index (DXY) pulls back from an 11-month high after weaker US employment data on Wednesday, which might lower US Treasury yields. The DXY beats lower around 106.60 at the time of writing.

However, the initial bond sell-off pushed US yields to levels not witnessed in years, followed by a rebound. The 10-year US Treasury yield has corrected from 4.88%, reached on Wednesday, the highest since 2007. Investors will closely monitor the bond market, recognizing its pivotal role in driving financial markets.

US ISM Services PMI declined from 54.5 to 53.6 in September, in line with expectations. The ADP Employment Change for September rose by 89,000, falling short of the market consensus of 153,000 and marking the lowest level since January 2021.

Traders are likely on the lookout for the upcoming Jobless Claims and Nonfarm Payrolls on Friday. Positive figures could spur further USD gains and elevate volatility in the bond market.

German Trade Balance will also be eyed on Thursday, which is expected to decline from €15.9B to €15B for the month of August.