US Interest Rate Forecast: Weak Jobs Cut Fed Hike Odds Ahead of CPI

Author: Muhammad Umair

Published: August 9, 2026

Key Points

• Weak US jobs data has reduced expectations for a Federal Reserve (Fed) rate hike in September.
• The upcoming Consumer Price Index (CPI) report will be crucial for the Fed's next policy decision.
• The EUR/USD maintains a bullish outlook while the 1.1360 support level holds.

Weak US Jobs Report Reduces September Fed Rate Hike Risk

The US economy experienced a loss of 23,000 jobs in July, with significant downward revisions to previous months' job growth. The unemployment rate fell from 4.2% to 4.1%, but this was not indicative of a stronger labor market, as the labor force participation rate dropped to 61.4%, the lowest in over five years. This suggests a weakening demand for workers, with notable job losses in local government education and retail sectors.

US Inflation Data Becomes the Next Test for the Fed

Inflation rates have shown signs of easing, with the overall inflation rate dropping to 3.5% in June from 4.2% in May. The core inflation rate also decreased to 2.6%. The upcoming July CPI report, expected to show further declines in inflation, will be critical for the Fed's decision-making process regarding interest rates.

US Interest Rate Forecast Points to a September Hold

Market expectations for a Fed rate hike in September have decreased significantly following the weak jobs report. Prior to the report, the odds for a rate hike were at 55%, but they fell to 44% afterward. The Fed is likely to maintain interest rates at current levels unless the upcoming inflation data suggests otherwise.

Fed and ECB Policy Expectations Shape EUR/USD

The interest rate outlook in the eurozone differs from that of the US, with the European Central Bank (ECB) potentially poised for another rate hike. This divergence in monetary policy expectations has contributed to a weakening US dollar, supporting the EUR/USD pair.

EUR/USD Maintains Bullish Structure Above 1.1360

The EUR/USD pair is currently in a bullish structure, supported by the 1.1360 level. A break above the 1.1626 resistance could lead to further gains towards 1.1780 and 1.192. However, the upcoming US inflation data will play a significant role in determining the future direction of the pair.

Final Words

The weak jobs report has diminished the likelihood of a Fed rate hike in September, but the risk remains if inflation data shows unexpected strength. The July CPI report will be a key indicator for the Fed's future actions, and the interplay between US and ECB rate expectations will continue to influence the EUR/USD exchange rate.