- The US dollar is facing challenges, causing the US/USD to rise amid speculation about potential Fed rate cuts.
- On Thursday, the pair saw a nearly 0.5% decline, driven by strong US economic indicators.
- The Euro might gain support from an anticipated widening gap between Fed and ECB interest rates.
During Asian trading hours on Friday, the EUR/USD sits around 1.1660, reflecting drops from past sessions. The pair seems to benefit from the US dollar’s struggles, particularly with growing expectations that the Federal Reserve may lower interest rates this September. Data from CME’s FEDWATCH tool indicates a roughly 92% chance that a 25 basis point cut will occur at the Fed’s upcoming meeting.
Nonetheless, EUR/USD dropped almost 0.5% on Thursday, as the US dollar strengthened following favorable economic data. Later today, attention will also turn to US retail sales figures from July and preliminary consumer sentiment indices from Michigan.
The Producer Price Index (PPI) in the US surged 3.3% year-on-year in July, up from 2.4% earlier in the year and exceeding the expected 2.5%. In contrast, the annual core PPI increased by 3.7% in July, higher than the anticipated 2.6%. Initial unemployment claims for the week ending August 9th fell to 224K, lower than a market expectation of 228K.
Market participants expect the European Central Bank (ECB) to conclude its easing cycle after eight rate cuts over the past year, maintaining the lowest borrowing levels since November 2022. However, another rate cut from the ECB might not come until 2025. The economic calendar for the European Union is quite empty today due to the East Feast of Our Lady of Heaven.
