The EUR/USD pair advanced to around 1.1675 during Monday’s early European session, supported by renewed optimism surrounding potential talks between US President Donald Trump and Russian President Vladimir Putin, as well as a more cautious stance from the European Central Bank (ECB).
Trump and Putin are set to meet in Alaska on Friday to discuss possible steps toward ending the war in Ukraine. The meeting announcement came after Trump’s August 8 ceasefire deadline passed without further sanctions, easing immediate geopolitical concerns. Hopes of progress in the discussions have offered a lift to the Euro.
On the monetary policy front, economists surveyed by Bloomberg have delayed their expectations for the next ECB rate cut by three months. Market participants now see just over a 50% chance of a quarter-point reduction by year-end, with September cuts appearing less likely. This shift in sentiment has further supported the single currency.
Meanwhile, the US Dollar remains under pressure amid growing expectations for Federal Reserve rate cuts. Last week’s July jobs report showed weaker-than-expected hiring, prompting traders to increase bets on policy easing. The CME FedWatch Tool indicates an 89% probability of a rate cut in September, with at least two cuts anticipated before year-end.
Traders now turn their focus to the US Consumer Price Index (CPI) data for July, scheduled for release on Tuesday, for further direction on the Fed’s rate path and the EUR/USD outlook.
