- The EUR/USD pair is trending toward 1.1680 during Friday’s Asian market session.
- Major US PCE inflation data set for release later today may provide important insights.
- A recent Reuters survey indicates most economists expect the ECB to maintain its current stance until at least December 2025.
During Friday’s Asian trading hours, the EUR/USD pair managed to recover some of its losses and is hovering around 1.1680, thanks in part to the weaker performance of the US dollar. Still, traders are being somewhat cautious ahead of the significant US Personal Consumption Expenditures (PCE) Price Index report for August.
Mixed messages are coming from Federal Reserve officials. For instance, Kansas City Fed President Jeffrey Schmidt suggested that there may not be an immediate need for interest rate cuts, emphasizing the Fed’s ongoing commitment to combat inflation. On the other hand, Chicago Fed President Austan Goolsbee expressed hesitance in easing policies, especially with inflation drifting away from its targets.
Current discussions are turning toward US consumer spending data, raising concerns that the economy may need to endure additional rate hikes. The market has adjusted the probability of a 25 basis point reduction at the Fed’s October meeting to 87.7%, down from the previous 90-92% range just a couple of days ago. Increased inflation signs could diminish the likelihood of rate cuts, bolstering the dollar, which would create challenges for the EUR/USD pair.
A Reuters poll indicates that many economists believe the European Central Bank (ECB) will keep its current policies intact for the remainder of the year. If the outlook shifts to cuts, it could lend some support to the euro against the dollar. However, certain financial experts anticipate possible further reductions later this year or even in early 2026, depending on economic needs.
