The EUR/USD pair continued its upward momentum for a third straight session, trading near 1.1780 during Asian hours on Tuesday. The euro advanced as the US Dollar (USD) remained under pressure, weighed down by last week’s weaker-than-expected August jobs report, which strengthened bets on a Federal Reserve (Fed) rate cut in September. Market pricing now reflects growing expectations of a larger 50-basis-point move.
According to the CME FedWatch Tool, traders are pricing in nearly a 90% chance of a 25-basis-point cut at the Fed’s September meeting, up from 86% a week earlier, while the odds of a 50-bps reduction stand at about 10%. Market attention will turn to the US Nonfarm Payrolls Benchmark Revision later in the day.
The US economic calendar is set to remain busy this week, with inflation data in focus. On Wednesday, the Producer Price Index (PPI) for August is expected to show a 3.3% year-on-year increase in the headline figure, while the core PPI is projected at 3.5%. Thursday’s Consumer Price Index (CPI) report will then take center stage, potentially shaping the Fed’s near-term policy outlook.
Across the Atlantic, France faces fresh political turbulence after Prime Minister François Bayrou lost a confidence vote in the National Assembly, sparked by opposition to his budget proposals. President Emmanuel Macron is expected to name a new prime minister within days, according to the BBC.
Meanwhile, investors anticipate the European Central Bank (ECB) will leave interest rates unchanged for the second consecutive meeting on Thursday. With growth steady and inflation close to target, markets will closely monitor the bank’s communication for clues about policy direction through the rest of the year.
