• EUR/USD extends gains as US Dollar weakens after mixed US data.
• The Euro could face challenges as markets speculate over an ECB interest rate cut in June.
• The expected decline in US Nonfarm Payrolls could further weaken the US Dollar.

The EUR/USD pair extends its gains for the second consecutive day, edging higher to near 1.0880 during the European session on Friday. EUR/USD gained upward support following mixed economic data from the United States (US). Further, the subdued US Treasury yields contribute to adding pressure on the US Dollar (USD). US Treasury yields experienced downward pressure following reports from regional bank New York Community Bancorp, which indicated increased stress in its commercial real estate portfolio.

The Euro faced a decline following the release of softer German consumer inflation data on Wednesday, as market sentiment leaned towards the possibility of a speculative interest rate cut by the European Central Bank (ECB) in June. However, the European currency initiated a recovery after the release of mixed Eurozone inflation data on Thursday.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against a basket of six major currencies, struggles to retrace its recent losses. The DXY trades around 103.00, with the 2-year and 10-year US Treasury yields hovering around 4.23% and 3.88%, respectively, at the time of writing.

US Initial Jobless Claims rose to 224K for the week ending on January 26, exceeding both the previous increase of 215K and the expected figure of 212K. However, ISM Manufacturing PMI improved to 49.1 from the prior reading of 47.1, surpassing the anticipated figure of 47.0 in January. On Friday, key labor data is set to be released, including US Average Hourly Earnings and Nonfarm Payrolls (NFP).