The EUR/USD pair finds modest support near the 1.1400 level during Thursday’s Asian session, as the US Dollar (USD) pauses its rally following a five-day winning streak. The pair shows signs of stability as traders take a cautious approach ahead of major economic releases from both the Eurozone and the United States.
The US Dollar Index (DXY), which measures the greenback’s performance against a basket of six major currencies, remains firm near the 100.00 level—a fresh two-month high hit on Wednesday. The recent strength in the USD was driven by stronger-than-expected US Q2 GDP data and hawkish commentary from Federal Reserve Chair Jerome Powell.
Fed Dials Back Rate Cut Hopes
During Wednesday’s policy announcement and press conference, the Fed maintained its current interest rate but signaled concern over upside inflation risks. Chair Powell’s remarks led markets to scale back expectations for a rate cut in the September meeting.
According to the CME FedWatch Tool, the probability of a rate cut in September has dropped significantly—from 63.3% on Tuesday to 43.2% on Wednesday—highlighting the market’s shift in sentiment following the Fed’s hawkish tone.
Focus Turns to US NFP and Eurozone Inflation Data
Looking ahead, market participants are eyeing the US Nonfarm Payrolls (NFP) report for July, due Friday. A strong reading would reinforce the Fed’s cautious stance and further reduce expectations of near-term policy easing. Conversely, signs of labor market softness could revive rate-cut hopes and weigh on the greenback.
In the Eurozone, the focus shifts to inflation data, particularly the preliminary Harmonized Index of Consumer Prices (HICP) for July, also due Friday. Investors will closely monitor Thursday’s inflation readings from Germany, France, and Italy to assess the broader price trend in the region. Notably, Spain’s flash HICP figures released on Wednesday showed a monthly decline in price pressures, raising questions about the pace of inflation across the bloc.
