The European Central Bank (ECB) has followed the Bank of Canada as the second major central bank to reduce interest rates this week, lowering its main refinancing rate by 25 basis points to 4.25% overnight.

In an unusual move, the ECB raised its inflation forecasts for 2025 from 2.0% to 2.2%. This adjustment led the central bank to be more cautious about indicating further rate cuts, as higher inflation forecasts typically make additional rate reductions less likely.

Due to the lack of strong signals for future cuts, the euro appreciated following the announcement, with the EUR/USD exchange rate increasing by 0.2%.

Tonight, the spotlight is on the crucial US jobs report. Financial markets are still unsettled after last month’s report missed forecasts for the first time in seven months, compounded by other weakening US labor market data, such as Tuesday’s JOLTS report.

According to Refinitiv, markets are anticipating 185,000 new jobs, up from last month’s 175,000, with the unemployment rate expected to remain steady at 3.9%.

However, another weak number could have a significant impact, potentially causing the USD index to break below support at 104.00, reaching its lowest level since mid-March.