- Market expects an ECB rate cut in September due to slowing economic growth, following the Fed’s dovish shift.
- Key EUR/USD levels to watch are the December high of 1.1134 and July high of 1.1275, with support near 1.1000.
Futures markets are pricing in a US rate cut for September, with a 62% chance of a 25-basis point cut and a 38% chance of 50-basis points. The Fed’s dovish shift has helped the euro surge to its highest level in more than a year.
Attention now shifts to the ECB’s 12 September rate decision. After cutting rates in June and pausing in July, analysts expect the ECB to resume easing amid slowing growth. However, ECB board member Isabel Schnabel, a key hawk, maintains that inflation concerns should take priority over growth concerns.
For EUR/USD, bulls may target the December high of 1.1134 and July high of 1.1275, with support possibly near 1.1000.
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