The EUR/USD pair continues its recovery, reaching around 1.0985 during early European trading on Tuesday. The rise comes amid a modest weakening of the US Dollar (USD), though further gains for the pair may be constrained as traders anticipate a smaller interest rate cut from the US Federal Reserve (Fed) in November.
French Central Bank Chief François Villeroy de Galhau stated on Monday that the European Central Bank (ECB) is likely to implement interest rate cuts next week due to weak economic growth, which raises concerns that inflation may fall short of its 2% target. His comments have supported market expectations for an additional 150 basis points of ECB rate cuts over the next year.
Later on Tuesday, ECB board member Isabel Schnabel is scheduled to speak, and data on Germany’s Industrial Production will be released. Dovish statements from ECB officials or indications of economic weakness in Europe’s largest economy could further pressure the Euro (EUR) against the Greenback.
On the USD side, positive US jobs data released on Friday has bolstered expectations that the Fed will implement a 25 basis point rate cut at its November meeting. This prospect could strengthen the USD overall, potentially limiting the upside for the EUR/USD pair. According to the CME FedWatch Tool, the likelihood of a 25 basis point rate cut now stands at 85%, a significant increase from just 31.1% the previous week.
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