EUR/USD Rebounds to Weekly Highs Amid Volatile Trading.

EUR/USD maintains its rebound to weekly highs above 1.0950, marking eight-day highs of 1.0975 reached on Friday. The pair is currently consolidating its gains from last week in what appears to be a relatively calm start to a significant week ahead.

Investors are digesting the impact of Friday's volatile trading, which was spurred by the US labor market report. The report fueled a further recovery in the EUR/USD pair from around the 1.0830 region. The main currency pair experienced a substantial increase on Friday as the US Dollar suffered heavy losses due to disappointing US payrolls data. Non-farm payrolls for June came in at 209,000, falling short of the estimated 225,000. Additionally, there were significant downward revisions for the May and April NFP figures, suggesting a slowdown in the job market. On the other hand, the wage inflation data, measured by Average Hourly Earnings, exceeded expectations, with a +0.4% reading for June, matching May's revised figure. Following the release of the US jobs data, investors began to doubt the Fed's anticipated hawkish stance, resulting in EUR/USD climbing back towards 1.1000 at the expense of the US Dollar.

Currently, markets are pricing in approximately 70% chances of a pause in Fed rate hikes in September, following the expected 25 basis points rate hike by the US central bank this month.

Meanwhile, mixed statements from European Central Bank (ECB) officials over the weekend are keeping the Euro's further upside limited for now. ECB Governing Council member Francois Villeroy de Galhau stated that "Eurozone rates will soon reach their high point, but it will be more of a high plateau than a peak." ECB Governing Council member and Bank of Portugal Governor Mario Centeno expects Eurozone inflation to be under 3% by the end of 2023.

Traders will closely monitor the upcoming Chinese inflation data, as it could significantly impact risk sentiment and US Dollar valuations, subsequently influencing EUR/USD price action. Additionally, attention will be on the Eurozone Sentix Investor Confidence data for July, which is scheduled for release on Monday, as there is a lack of top-tier US economic data. This week, traders will also closely follow Germany's ZEW survey and the US Consumer Price Index (CPI), as these will provide important insights for EUR/USD trading.