Euro falls below 1.16 as strong US employment data boosts the dollar and strengthens Fed rate hike expectations

⑴ The euro has fallen below the 1.16 level against the US dollar, as stronger-than-expected US employment data boosted the dollar and reinforced market expectations of Federal Reserve policy tightening. ⑵ In August, US non-farm payrolls increased by 162,000, far exceeding the market expectation of 56,000, pushing the implied probability of a Fed rate hike this month close to 58%. ⑶ Market attention is gradually shifting to the European Central Bank's policy meeting on September 10. The money market is still fully pricing in a 25 basis point rate hike to 2.5% next week, and pricing indicates a nearly 100% probability that the deposit rate will reach 3% by June 2027, implying two more hikes before the middle of 2027. ⑷ In terms of economic data, German factory orders in July grew 2.5% month-on-month, retreating from the upwardly revised previous value of 3.7% but still far above the market expectation of 0.3%.