The EUR/USD pair is showing strength near 1.1080 in the early Asian session on Friday, bouncing back after a two-day decline. The positive momentum comes after the US Gross Domestic Product (GDP) data for the second quarter exceeded expectations, with a growth rate of 3.0% reported by the Department of Commerce.
This better-than-expected GDP figure has raised hopes that the US economy could avoid a recession, leading to a reduced likelihood of a larger rate cut by the Federal Reserve in September. While markets are still pricing in a 25 basis points rate cut, the chance of a deeper cut has decreased following the GDP data release.
On the other side of the Atlantic, cooling inflation in Germany and Spain has fueled speculation of an ECB rate cut in September. The ECB’s focus on maintaining price stability and managing monetary policy for the Eurozone could lead to lower rates in response to the slowing economy and subdued inflation.
Analysis:
The recent economic data releases have significant implications for both the US Dollar and the Euro. The stronger US GDP growth has boosted the USD and reduced expectations for a larger rate cut by the Fed. Meanwhile, the cooling inflation in Europe has increased the likelihood of an ECB rate cut, putting pressure on the Euro. Investors should monitor central bank policies and economic indicators to make informed decisions in the forex market.