The EUR/USD pair maintained its gains near 1.1130 on Monday, buoyed by increasing speculation that the Federal Reserve will implement significant rate cuts. The US Dollar (USD) has weakened as traders bet on aggressive policy easing by the Fed, following softer-than-expected US Producer Price Index (PPI) data and concerns about the labor market. The US Dollar Index (DXY) dropped to around 100.70.
According to the CME FedWatch tool, the probability of a 50 basis point rate cut by the Fed in September has surged to 61%, up from 30% a week ago. This shift follows August’s PPI data, which showed a slower rise of 1.7% year-over-year compared to estimates and the previous month’s 2.1%, indicating potential demand weakness and inflation concerns.
The Federal Reserve is expected to start reducing rates aggressively in its upcoming meeting on Wednesday due to worries about labor market conditions and a belief that inflation will return to its 2% target. Investors are also watching the US Retail Sales data for August, scheduled for release on Tuesday, which is forecasted to show slower growth of 0.2% compared to 1% in July.
In the Eurozone, the European Central Bank (ECB) recently cut its Deposit Facility Rate by 25 basis points to 3.50% but did not outline a specific path for future cuts. ECB President Christine Lagarde emphasized decisions will be based on inflation and economic data. Analysts expect the ECB to cut rates once more in the last quarter of the year due to ongoing economic challenges, particularly in Germany, where structural issues and a weaker economic outlook are raising concerns.
https://www.fxstreet.com/news/eur-usd-gains-as-fed-outsize-rate-cut-bets-surge-202409160933


