On Monday, the euro strengthened against the safe haven US dollar, with risk sentiment improving on hopes that China's policy stimulus may stabilize the economy, while US jobs data fueled speculation that the Federal Reserve may have reached the end of its rate hike cycle.
With US markets closed on Monday, liquidity may be relatively low and traders may be cautious about making big bets. The euro rose 0.12% to trade at $1.0786, close to touching a 10-week low touched last week against the US dollar. The Euro has lost nearly 12% this summer.
The US Dollar, which measures the US dollar against a basket of six currencies including the euro, eased slightly by 0.14% to 104.09, but was still near the two-month level of 104.12 touched on August 25.
China is stepping up measures to strengthen the country's economy with Beijing planning further actions including easing restrictions on home purchases.
The Australian dollar and New Zealand dollar also received support from these measures.
Meanwhile, data on Friday showed US job growth picked up in August, but the unemployment rate jumped to 3.8%, while wage growth slowed.
A series of economic data showing subdued inflation and a loosening labor market have added to confidence that the US economy is slowing without contracting sharply, bolstering expectations that the economy will experience slower growth.
"The euro may have received a slight boost that, overall, the ECB will maintain a hawkish bias to prevent market rates from falling too early," said Jane Foley, Head of FX Strategist at Rabobank.
ECB board member Isabel Schnabel said last week that eurozone growth was weaker than predicted just a few months ago but that this did not automatically negate the need for more rate hikes, especially as investors were discounting some of the ECB's past efforts.
In the ECB President's latest speech, Christine Lagarde fundamentally emphasized on Monday that policymakers should "communicate effectively to ensure that medium-term inflation expectations remain intact during this process." His speech also did not give much indication of the ECB's direction on interest rates.
