The EUR/USD currency pair continues to trade in negative territory, falling to around 1.0835 during the Asian session on Thursday. This marks the third consecutive day of declines for the major pair, driven by a pessimistic outlook on the Eurozone’s economy and growing speculation that the European Central Bank (ECB) may implement additional rate cuts in September.
Earlier this week, ECB Vice President Luis de Guindos suggested that the central bank could lower interest rates in September, pending further economic data. ECB President Christine Lagarde also hinted last week that rate cuts in September were “wide open” due to easing inflationary pressures. The prospect of further ECB rate reductions is expected to exert downward pressure on the Euro (EUR) in the near term.
In contrast, market participants anticipate that the US Federal Reserve (Fed) may begin reducing interest rates in September. The CME FedWatch Tool indicates a 100% probability of a 25 basis points (bps) rate cut, while the Chicago Board of Trade (CBOT) data suggests an estimated 53 bps of easing for 2024.
In the US, private sector business activity continued to expand in July. The S&P Global Manufacturing PMI fell to 49.5 from 51.6 in the previous month, while the Services PMI increased to 56.0 from 55.3, surpassing the consensus estimate of 54.4. The S&P Global Composite PMI rose to 55.0 in July from 54.8.
Later on Thursday, investors will closely monitor ECB President Lagarde’s speech and the advanced US Gross Domestic Product (GDP) data for the second quarter (Q2). The US economy is projected to grow by 2.0%, up from the previous estimate of 1.4%.
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