EUR/USD Rises Above 1.1600 as Fed Dovish Tone Eases Market Jitters

EUR/USD climbs amid softening risk sentiment and dovish Fed commentary, with investors watching US-EU trade talks.

The EUR/USD pair rebounded sharply in Friday’s Asian session, pushing past the 1.1600 mark and trading near 1.1630. The uptick comes as the US Dollar weakens following dovish remarks from Federal Reserve officials, which helped ease market risk aversion.

Fed Officials Signal Easing Bias

The greenback came under pressure after key Fed policymakers hinted at potential rate cuts. San Francisco Fed President Mary Daly remarked that expecting two rate cuts in 2025 is a “reasonable” projection, though she cautioned against delaying action too long.

Supporting that outlook, Fed Governor Christopher Waller advocated for a rate reduction as early as July, citing increased economic headwinds and warning that waiting could necessitate sharper cuts later. His comments strengthened expectations for a shift in Fed policy direction.

On the other hand, Fed Governor Adriana Kugler urged patience, stating that the central bank should hold rates steady “for some time” to ensure inflation expectations remain under control. She pointed to early signs of tariff-related price pressures as a reason for caution.

Trade Optimism Boosts Euro

In parallel, optimism surrounding a potential trade deal between the United States and the European Union also buoyed the Euro. Markets are hopeful that an agreement could be finalized before the August 1 deadline set by US President Donald Trump, who recently announced a 30% tariff on EU imports but signaled openness to negotiations.

This trade progress further reduced safe-haven demand for the US Dollar, allowing EUR/USD to recover from its previous session’s losses.

ECB Outlook Remains Mixed

Looking ahead, investors are awaiting the upcoming European Central Bank (ECB) policy meeting. While the ECB is widely expected to keep interest rates unchanged next week, markets are still pricing in a 25 basis point rate cut later this year.

ECB policymakers remain divided on the pace of monetary easing, adding a layer of uncertainty for EUR traders. Nevertheless, the combination of dovish Fed rhetoric and trade optimism provides near-term support for the EUR/USD pair.

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