The EUR/USD pair reached an eight-month high of 1.1087 on Tuesday, but pulled back slightly to trade around 1.1080 during the Asian session. This dip is attributed to the strengthening US Dollar amid risk aversion sentiment. However, the Greenback’s rally may face obstacles as the market prices in a 76.5% chance of a 25 basis point rate cut by the US Federal Reserve (Fed) in September, according to CME’s FedWatch Tool.
Minneapolis Fed President Neel Kashkari’s comments about potential US interest rate cuts in September further fueled speculation. All eyes are now on Fed Chair Jerome Powell’s speech at the upcoming Jackson Hole Economic Symposium, which could provide more clarity on the Fed’s stance on monetary policy.
In the Eurozone, upcoming data releases on business activity and consumer prices will be closely watched as they could influence the European Central Bank’s (ECB) decision in September. Investors anticipate a gradual reduction in interest rates by the ECB, but policymakers remain cautious due to concerns about potential price pressures.
The Harmonized Index of Consumer Prices (HICP) data from the European Monetary Union and Producer Price Index figures from Germany, set to be released on Tuesday, may provide further insights into the ECB’s policy trajectory.
Overall, the EUR/USD pair’s movements are driven by a combination of factors, including central bank policies, economic data releases, and market sentiment. Traders and investors should closely monitor upcoming events and data releases to stay informed about potential market trends and opportunities.