The EUR/USD pair continues its downward trend, nearing the crucial 1.1000 support level amid buying pressure on the US Dollar. As investors anticipate US inflation data, the US Dollar Index remains steady, with market focus on the potential impact on the Fed’s rate cut decision for September.
Recent statements from Fed officials, including Fed Chair Jerome Powell, hint at a possible rate cut this month. The upcoming US Consumer Price Index (CPI) report will provide further insights into the Fed’s monetary policy direction, with a 63% probability of a 25 bps rate cut in September according to the CME Group’s FedWatch Tool.
On the other hand, the European Central Bank (ECB) is considering a rate cut in September due to concerns about economic growth. Growing divisions among ECB policymakers and lower-than-expected CPI data in Germany and the Eurozone could influence future rate decisions.
Overall, the policy gap between the Fed and the ECB may narrow if the Fed implements more rate cuts, potentially supporting the EUR/USD pair. However, the long-term outlook favors the US economy over the Eurozone, which could limit prolonged weakness in the dollar.
Analysis:
The EUR/USD pair is approaching a key support level as investors await US inflation data and Fed’s rate cut decision for September. The outcome of these events could impact the currency pair’s direction in the short and long term. Traders should closely monitor upcoming economic indicators and central bank decisions to make informed investment decisions.