EUR/USD Gains as Speculation Rises for Fed Rate Cuts
- EUR/USD extends last week’s gains near 1.1130 as rising bets for Fed large rate cuts weigh on the US Dollar.
- Soft US PPI and deepening concerns over labor market outlook prompt Fed jumbo rate cut bets.
- The ECB is expected to cut interest rates once again in the last quarter of the year.
In the North American trading session on Monday, EUR/USD continues its upward momentum, hovering near 1.1120. This surge comes as speculation grows about the US Federal Reserve (Fed) potentially implementing aggressive policy easing starting Wednesday, putting pressure on the US Dollar (USD). The US Dollar Index (DXY) drops sharply to around 100.70, reflecting the Greenback’s weakening against major currencies.
Fed Rate Cut Expectations
According to the CME FedWatch tool, there is a 61% probability of the Fed reducing interest rates by 50 basis points (bps) to the 4.75%-5.00% range in September, a significant increase from 30% a week ago. This surge in expectations is fueled by the US Producer Price Index (PPI) data for August, which came in below expectations, signaling a potential slowdown in producer inflation and raising concerns about demand outlook due to weak purchasing power in a high-interest rate environment.
Fed’s Concerns and Market Reaction
Market experts anticipate the Fed to commence interest rate cuts in Wednesday’s meeting due to worries about deteriorating labor market conditions and the need to address inflationary pressures to meet the central bank’s 2% target. Investors are closely watching the upcoming US Retail Sales data for August, expected to show a slower growth rate of 0.2% compared to July’s 1% increase.
EUR/USD Gains Amid ECB Uncertainty
- EUR/USD strengthens against the US Dollar as uncertainty looms over the European Central Bank’s (ECB) interest rate strategy.
- Following the ECB’s expected 25 bps Rate on Deposit Facility cut, ECB President Christine Lagarde emphasizes data-driven interest rate decisions.
- Market confidence grows as ECB officials suggest progress in combating Eurozone inflation, with expectations of another rate cut later this year.
The ECB’s cautious approach to interest rate adjustments has led to mixed performance of the Euro against major currencies. Analysts predict another rate cut by the ECB in the last quarter of the year, citing concerns over the German economic outlook and structural challenges impacting the country’s growth prospects.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against major currencies today, with Euro showing strength against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.48% | -0.62% | -0.25% | -0.09% | -0.60% | -0.51% | -0.41% |
The heat map shows percentage changes of major currencies against each other, providing insights into currency movements.
Technical Analysis: EUR/USD Stability Above 1.1100
EUR/USD aims to stabilize above 1.1100 after a breakout from the Rising Channel pattern near 1.1000. The pair’s short-term outlook is positive, supported by trading above the 20-day Exponential Moving Average (EMA) at 1.1060. The Relative Strength Index (RSI) near 60.00 indicates a bullish momentum.
Key resistance levels for EUR/USD are at 1.1155 and 1.1200, while major support zones lie at 1.1000 and 1.0950.