- EUR/USD receives support as the US Dollar struggles amid rising odds of a Fed bumper 50-basis-point rate cut in September.
- The CME FedWatch tool shows markets pricing in 10% odds of a larger 50-basis-point move at the September meeting.
- The French government collapsed after Prime Minister François Bayrou lost a confidence vote in the National Assembly.
EUR/USD extends its winning streak for the third successive session, trading around 1.1780 during the Asian hours on Tuesday. The pair appreciates as the US Dollar (USD) continues to face challenges, following last week’s weaker-than-expected August jobs data, which has bolstered expectations that the US Federal Reserve (Fed) will cut rates in September. Markets are increasingly betting on the possibility of a larger 50-basis-point move.
The CME FedWatch tool indicates a pricing in nearly 90% of a 25-basis-point (bps) rate cut by the Fed at the September policy meeting, up from 86% a week ago, with 10% odds of a potential 50 bps reduction this month. Traders will likely watch the US Nonfarm Payrolls Benchmark Revision due later in the day.
Investors are preparing for a busy week of economic data from the United States (US), highlighted by two key inflation reports that could shape the interest rate outlook. The August US Producer Price Index (PPI) is scheduled for release on Wednesday, with expectations that the headline PPI for August to rise 3.3% year-on-year, while the core measure is projected to increase 3.5% over the same period. Focus will shift toward Thursday’s Consumer Price Index (CPI).
In the Eurozone, France is grappling with a fresh political crisis after Prime Minister François Bayrou lost a confidence vote in the National Assembly. Bayrou had unexpectedly called the vote amid strong opposition to his budget plans. President Emmanuel Macron is expected to appoint a new prime minister within days, per the BBC.
Meanwhile, traders expect the European Central Bank (ECB) to keep rates unchanged for the second consecutive meeting on Thursday, supported by steady growth and inflation hovering near the target. Market participants will scrutinize the meeting for any guidance on the bank’s outlook for the rest of the year.
