- The EUR/USD is projected to decline to around 1.1855 during the Asian session on Wednesday.
- Market participants have fully priced in a 25 basis points cut from the Fed.
- Germany’s Zew Sentiment is expected to show improvement in September.
The EUR/USD pair lost its upward momentum, reaching approximately 1.1855 and breaking a four-day winning streak during Wednesday’s Asian trading hours. Still, the potential downside for this major currency pair may be somewhat limited since economists anticipate a 25 basis points rate cut from the Federal Reserve at the conclusion of its two-day meeting on Wednesday.
According to CME FedWatch, the Fed is largely expected to lower its key lending rate from 4.0% to 4.25%. The likelihood of a larger cut, around 50 basis points, appears to be only about 4%.
Traders are looking forward to insights from a speech by Federal Reserve Chairman Jerome Powell following the policy meeting. An economist from ING commented that “the 25 basis points cut allows for a somewhat harsher trend, but if they go for the 50 basis points cut, Powell could adopt a more hawkish stance, given the overall context.”
Meanwhile, the German Zew Economic Sentiment Survey indicates investor optimism, which could bolster the euro. The Zew Economic Sentiment Index for Germany climbed to 37.3 from 34.7 in August, surpassing expectations of 26.3.
Later on Wednesday, ECB President Christine Lagarde is also scheduled to deliver remarks. The impactful comments from ECB officials may influence the EUR against the USD. Additionally, the latest readings for harmonized consumer price (HICP) data from the eurozone will be released on the same day.
