The EUR/USD pair rebounded sharply on Friday during the Asian session, climbing above the 1.1600 mark to trade around 1.1630. The recovery follows a decline in the previous session and comes amid a softer US Dollar (USD) driven by easing risk sentiment and dovish commentary from several Federal Reserve (Fed) officials.
San Francisco Fed President Mary Daly indicated that two rate cuts this year remain a “reasonable” baseline, while warning against waiting too long to adjust policy. Similarly, Fed Governor Christopher Waller advocated for a rate cut as early as July, citing rising economic risks and suggesting delays could lead to more aggressive action later.
However, not all voices at the Fed echoed a dovish tone. Fed Governor Adriana Kugler advised caution, stressing that tariff-related inflation is starting to show and that maintaining a restrictive stance is still necessary to anchor long-term expectations.
Market participants now anticipate a potential start to rate cuts in September, with two cuts expected by year-end.
Adding to the volatility, US President Donald Trump recently imposed a 30% tariff on imports from the European Union (EU), though he signaled openness to reaching a trade agreement before the August 1 deadline. This has left investors monitoring transatlantic trade talks closely.
On the European front, the European Central Bank (ECB) is widely expected to keep rates unchanged at its meeting next week. That said, markets are still pricing in a possible 25 basis point rate cut later in the year, as ECB policymakers continue to present mixed signals on the future path of monetary easing.
