- Euro slips to near-term lows as risk-off markets bid Greenback.
- European markets will be largely dark on Wednesday.
- Midweek Fed rate call on the cards.
On Tuesday, the EUR/USD pair slipped below the 1.0670 level following an unexpected rise in US wages, sparking concerns about persistent inflation. This development tempered expectations of rate cuts and prompted investors to seek safety.
With European markets largely closed on Wednesday for Labour Day, attention turns to the Federal Reserve’s latest rate decision. While the consensus anticipates the Fed maintaining rates, investors eagerly await clearer policy signals amidst inflation concerns and a significant downturn in US economic growth indicators.
Recent data revealing accelerated housing prices and rising wage costs for businesses, alongside plummeting consumer and business sentiment surveys, have intensified the dilemma of a sluggish economy burdened by elevated inflation. This scenario challenges the Fed’s capacity to implement rate cuts at the pace previously anticipated since the beginning of 2024.
According to the CME’s FedWatch Tool, rate markets now project only one quarter-point rate cut from the Fed this year, with a 54% probability of no rate adjustment in September and merely a 57% chance of a 25-basis-point reduction at the Fed’s November policy meeting.
EUR/USD technical outlook
On Tuesday, the EUR/USD’s descent firmly pushed the pair below the 200-hour Exponential Moving Average (EMA) at 1.0800, driving it towards fresh weekly lows and within reach of a supply zone near 1.0660.
Approaching April’s low bids near the 1.0600 mark, EUR/USD has retreated approximately 2% from its recent swing high at 1.0885.
EUR/USD hourly chart
EUR/USD daily chart
