The EUR/USD pair remains under pressure during Friday’s Asian session, hitting a near three-week low around 1.0455 in the final hour. With the ongoing bearish trend, the outlook for further declines in the pair appears likely, supported by a range of fundamental factors.
The Euro continues to face challenges due to the European Central Bank’s (ECB) dovish stance and growing concerns about the weakening Eurozone economy. On Thursday, the ECB cut interest rates for the fourth time this year and left the possibility of further easing open for 2025. This policy divergence is in stark contrast to the Federal Reserve’s less dovish outlook, reinforcing a negative bias for the EUR/USD pair.
Recent US economic data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), revealed that inflation control has stalled, hindering progress toward the Fed’s 2% target. Additionally, market expectations that US President Donald Trump’s expansionary policies could fuel inflationary pressures are prompting the Fed to take a more cautious approach to rate cuts. This shift supports the ongoing rise in US Treasury bond yields, which, in turn, helps the US Dollar (USD) extend its recent gains, touching a fresh monthly peak on Thursday.
Moreover, geopolitical tensions, including the Russia-Ukraine conflict, Middle East instability, and trade war fears, continue to bolster the safe-haven appeal of the US Dollar, further weighing on the EUR/USD pair.
Despite these factors, traders appear hesitant to make aggressive moves, opting to wait for the results of next week’s two-day FOMC monetary policy meeting. This meeting will provide key insights into the Fed’s approach to rate cuts, which will be crucial for determining the near-term direction of the USD and the EUR/USD pair. However, the overall market sentiment remains tilted toward a bearish outlook for the Euro.
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