The EUR/USD pair steadied near the 1.1400 level during Thursday’s Asian session as the US Dollar rally paused after five consecutive days of gains. While the broader trend still favors the greenback, traders are treading cautiously ahead of key macroeconomic releases from both sides of the Atlantic.
The US Dollar Index (DXY), which tracks the USD’s performance against a basket of major currencies, recently surged to a two-month high near 100.00 following hawkish signals from Federal Reserve Chair Jerome Powell. However, the momentum cooled as traders reassessed the likelihood of a September rate cut.
Fed Expectations Shift After Strong US Data
The Fed held interest rates steady this week, but upbeat Q2 GDP data and persistent inflation risks highlighted by Powell tempered market hopes for an imminent rate cut. As a result, the CME FedWatch Tool now shows a 43.2% probability of a September rate cut — down from 63.3% just a day earlier.
Dollar Performance This Week: EUR Leads the Decline
The US Dollar outperformed all major currencies this week, with the euro losing the most ground — down 2.79% against the greenback. The British pound and Swiss franc also declined notably, while the Japanese yen saw more modest losses.
Upcoming Data Could Drive Next Move
Attention now turns to Friday’s key economic releases. In the US, the July Nonfarm Payrolls (NFP) report is expected to offer further insight into labor market strength. A strong reading could reinforce Fed hawks and bolster the USD further.
In the Eurozone, the focus will be on the preliminary Harmonized Index of Consumer Prices (HICP) for July. While overall inflation is expected to rise modestly, recent data from Spain pointed to monthly deflation, raising concerns over price momentum across the bloc. Traders will closely watch inflation data from Germany, France, and Italy later Thursday for additional clues.
Outlook for EUR/USD
While EUR/USD has found temporary support at 1.1400, the broader backdrop remains bearish. With Fed rate cut bets fading and US data staying firm, the pair may remain under pressure unless Eurozone inflation surprises to the upside.
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