EUR/USD is recovering during Friday’s Asian session, trading near 1.1660 after rebounding from a near 0.5% drop in the previous session. The pair is benefiting from a softer US Dollar (USD) as markets increase bets on a September interest rate cut by the Federal Reserve (Fed). According to CME’s FedWatch Tool, traders are now pricing in about a 92% probability of a 25 basis point cut at the upcoming meeting.
On Thursday, the greenback strengthened on the back of upbeat US economic data, pushing EUR/USD lower. Later today, attention will turn to US July Retail Sales figures and the preliminary Michigan Consumer Sentiment Index, both scheduled for release in the North American session.
US Producer Price Index (PPI) data surprised to the upside, rising 3.3% year-on-year in July compared to 2.4% previously, well above the 2.5% forecast. Core PPI climbed to 3.7% from June’s 2.6%, also beating expectations of 2.9%. Meanwhile, US Initial Jobless Claims fell to 224K for the week ending August 9, below both the prior 227K (revised from 226K) and the market forecast of 228K.
In Europe, traders believe the European Central Bank (ECB) concluded its easing cycle in July after delivering eight rate cuts over the past year, bringing borrowing costs to their lowest level since November 2022. While another cut could be considered in 2025, the narrowing interest rate gap between the ECB and Fed has lent some support to the Euro. The EU economic calendar remains empty today due to the Feast of Our Lady of Heaven.
