The EUR/USD pair is holding steady around the 1.1700 mark during Thursday’s Asian session, with investors opting for caution ahead of the European Central Bank’s (ECB) policy decision later in the day.
ECB Expected to Hold Rates
Markets widely expect the ECB to leave its Main Refinancing Operations Rate unchanged at 2.15% for a second straight month. With inflation hovering close to target and trade-related uncertainties still weighing on sentiment, policymakers are likely to adopt a wait-and-see approach. Analysts suggest that the central bank could delay any further rate moves until December.
US Dollar Faces Pressure from Fed Rate Cut Bets
The US Dollar (USD) remains under pressure as investors continue to bet on a rate cut from the Federal Reserve (Fed) at its September meeting. According to the CME FedWatch Tool, markets are fully pricing in a 25 basis-point cut, with the probability of a more aggressive 50 bps move climbing to nearly 12%.
The latest US Producer Price Index (PPI) report has fueled these expectations. The PPI slipped 0.1% month-on-month in August, compared to a sharp 0.7% gain in July, signaling easing inflationary pressures. On an annual basis, the PPI slowed to 2.6% in August from 3.3% in July, falling short of market forecasts.
CPI Data in Focus
The spotlight now shifts to the US Consumer Price Index (CPI) for August, due later on Thursday. A hotter-than-expected inflation print could offer the dollar short-term relief, but weak labor market data released earlier in the month means the broader outlook still favors dollar weakness.
Outlook for EUR/USD
With the ECB likely to remain on hold and the Fed preparing for a potential rate cut, the EUR/USD pair could gain upward traction if the CPI data confirms slowing US inflation. Immediate resistance lies around 1.1750–1.1780, while support is seen near 1.1660–1.1670.
For now, traders are keeping a close eye on both ECB guidance and the US CPI release, which could set the near-term direction for the world’s most traded currency pair.
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