The EUR/USD pair is trading near 1.1145, ending a four-day winning streak in the Asian session. The outlook for the major pair remains positive as expectations grow for the US Federal Reserve to cut interest rates in September. On Thursday, the Eurozone and US will release their preliminary Purchasing Managers’ Index (PMI) for August, providing further insight into the market.
Following the release of the Fed’s July meeting minutes, it was revealed that most officials are in agreement that a rate cut may be necessary in September if inflation continues to cool. This sentiment was echoed by Atlanta Fed President Raphael Bostic, who hinted at a potential shift in policy stance. Fed Chair Jerome Powell’s upcoming speech at Jackson Hole is anticipated to provide more clarity on the interest rate trajectory in the US.
Meanwhile, the European Central Bank has hinted at a possible resumption of its easing cycle in September. Despite refraining from committing to specific interest rate cuts, ECB policymakers have expressed concerns about persistent economic weakness in the Eurozone. Market expectations indicate a high probability of a 25 basis points cut in the deposit rate in September, with potential for further cuts by the end of the year.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone, responsible for setting interest rates and managing monetary policy. The ECB’s primary goal is to maintain price stability by keeping inflation around 2%. In extreme situations, the ECB can implement Quantitative Easing (QE) to stimulate the economy by purchasing assets. QE typically results in a weaker Euro. Conversely, Quantitative Tightening (QT) is the reversal of QE and is usually positive for the Euro.