- EUR/USD indicated the flexibility of the policy and acknowledged negative risks in the US labor market.
- The traders on Thursday raised the difference of cut in 25 BPS in September in September, faster by 72%.
- Before September, core PCE, CPI and Nonform Payol hinged out, with exposure to inflation pressure.
The EUR/USD Skycket used to tilt Dovish in his Jackson Hole speech during the North American session after the Federal Reserve (Fed) president Jerome Powell, which led to the opening of the door to resume the lax cycle. The pair trades at 1.1718, which was 0.97%.
The market participants started the price in the Fed rate cut in September as Fed Chair Jerome Powell said that “the stability of unemployment rate and other labor market measures allows us to move forward carefully as we consider a change in our policy attitude.”
He said that it is a “proper base case” to think that tariffs will create “one-time” increase in inflation. However, he has been cautious, emphasizing that the risk of inflation turns upside down and there are risks for employment to the negative side.
Following Powell’s comments, the traders extended their stakes that the Fed would reduce rates in the September meeting, as the CME Fedwatch Tool has revealed the possibility of 72% to 85% a day earlier – the 25 basis points cut.
Despite this sudden change, the result of the September meeting is not yet certain. Before the decision of monetary policy, two inflation reports are awaited – the main individual consumption expenditure for July, and the consumer price index of August (CPI) of August – and August’s nonform payroll.
Two red-hot inflation reports and strong employment data fed can prevent the rates from cutting rates, pushing that decision to the last quarter of 2025.
Daily Digest Market Movers: Eur/USD Fed Fed Divided on Monetary Policy
- Greenback fell after Powell’s comments. The US Dollar Index (DXY), which tracks a US dollar performance against a basket of six currencies, exceeds 1% more than 97.55.
- Fed Chair Powell said, “Baseline outlook and shifting balance of risk may cause a warrant to adjust our policy stance.” He said that “unemployment rate and stability of other labor market measures allow us to move forward carefully.”
- Cleveland Fed president Beth Hamac said that he had heard that Powell policy is open -minded about Outlook, and he reiterated his stance to bring back inflation to the target. He said that the fed is at a short distance from a neutral rate and that “the fed needs to be cautious about any steps to cut.”
- EUR/USD Central Bank is ready to expand its benefits due to monetary policy deviation. The European Central Bank (ECB) is expected to keep the unchanged rates in the next meeting, while the fed, although the possibility of probability is sorted, its spontaneous cycle is expected to resume.
- The Euro discontinued a worse -to -the -affected gross domestic product (GDP) print in Germany, as the economy estimated -0.3 QOQ -assessment -0.1% -in the second quarter of -2025. Annually, the economy decreased from 0.4%to 0.2%.
- Expectations that the fed rates would decrease in the September meeting, this more trend continued. Across the pond, ECB is expected to catch rates with standing at 94%, and 6% of the 25-base-point (BPS) rate cut.
Technical approach: EUR/USD increases and cleans 1.17, buyers have high levels of 1.1829
The EUR/USD uptrend resumed on Friday, and after reaching a high level of 1.1742, expectations for advance towards the figure of 1.1800 increased. Momentum is represented by the relative power index (RSI), ready to cross the higher trending with the index and its latest peak.
The first resistance of the pair will be 1.1750, followed by 1.1800 points. If crossed, the next stop will be an annual high of 1.1829. On the other hand, a daily closed August 19 opens the door for testing a daily off August 19 high from 1.17 and 1.1650.
Euro sub -procurement
Euro 19 is the currency for the countries of the European Union that belong to Eurozone. This is the second most trading currency in the world behind the US dollar. In 2022, it was responsible for 31% of all forex transactions, with the average daily turnover $ 2.2 trillion more than a day. EUR/USD is the world’s heaviest business currency pair, which is accounting for all transactions estimated from all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
Frankfurt is the Reserve Bank for European Central Bank (ECB), Eurozone in Germany. The ECB determines interest rates and manages monetary policy. The primary mandate of ECB is to maintain value stability, which means to either control inflation or stimulate growth. Its primary tool is to increase or reduce interest rates. Relatively high interest rates – or compared to high rates – usually will benefit the euro and vice versa. The ECB Governing Council takes the monetary policy decision in the meetings held eight times a year. Decisions are made by Eurozone national banks and heads of six permanent members, including ECB President, Christine Lagard.
Eurozone inflation data, measured by the harmonious index of consumer value (HICP), is an important economical for the euro. If inflation increases more than expected, especially if above 2% target of ECB, it binds the ECB to raise interest rates to bring it under control. Relatively high interest rates will usually benefit the euro than its counterparts, as it makes the region more attractive as a place to park its money for global investors.
The data releases the health of the economy and can affect the euro. Indicators like GDP, manufacturing and services PMI, employment and consumer spirit survey can all affect the direction of single currency. A strong economy is good for the euro. Not only does it attract more foreign investment, but it can also encourage ECB to keep interest rates, which will directly strengthen the euro. Otherwise, if the economic data is weak, the euro is likely to fall. Economic data is particularly important for the four largest economies in the Euro region (Germany, France, Italy and Spain), as they are 75% of the Eurozone economy.
Another important data release for the euro is the business balance. Measure the difference between what this indicator earns from its exports and what spends on imports over a certain period. If a country makes excessive demand after exports, its currency will receive purely value from the additional demand made from foreign buyers to buy these goods. Therefore, a positive pure business balance strengthens a posture and contrast to a negative balance.
