EUR/USD corrected near 1.0360 in the late European session on Thursday. The major currency pair declined as the US dollar (USD) strengthened after a sharp decline in the last three trading days. The US Dollar Index (DXY), which tracks the greenback against six major currencies, recovered near 108.00 from a weekly low of 107.30.

The US dollar recovery appears to be a result of investors' caution ahead of the January Nonfarm Payrolls (NFP) data, due for release on Friday. The upbeat ADP Employment Change data for January has given a positive impression to the official employment data. ADP reported on Wednesday that the private sector added 183K workers last month, much higher than the 150K estimate and the previous release of 176K.

Investors will be watching Friday's US jobs data as it will influence market speculation about how long the Federal Reserve (Fed) will keep interest rates steady in the current range of 4.25%-4.50%. Last week, Fed Chairman Jerome Powell said that the central bank would make adjustments to monetary policy only after seeing "real progress in inflation or at least some weakness in the labor market."

Meanwhile, Fed officials are uncertain about the outlook for monetary policy as they struggle to predict the impact of US President Donald Trump's economic agenda. On Wednesday, Chicago Fed Bank President Austan Goolsbee said, "If we see inflation pick up or progress stalls in 2025, the Fed is going to be in a difficult position of trying to figure out whether the inflation is coming from overheating or whether it's coming from tariffs." (Newsmaker)

Source: FXstreet