EUR/USD faced additional selling pressure, adding to the weekly leg lower and revisiting the sub-1.0900 yardstick, or four-day lows.
EUR/USD dropped further and broke below 1.0900 on Thursday. The Dollar remained well bid on firm US labour market prints. Concerns over a potential US economic slowdown dwindled further. The pair’s negative price action was driven by the ongoing recovery of the US Dollar and a generally positive sentiment in global stock markets. That said, the USD Index continued its upward trajectory, moving above the 103.
Regarding the Fed and the USD, market expectations for a 50 bps rate cut in September still remained in place, with CME Group’s FedWatch Tool indicating nearly a 54% probability of such a move, down from around 65% on the previous day. If the Fed proceeds with more significant rate cuts, the policy gap between the Fed and the ECB could narrow in the medium term, potentially supporting further gains for EUR/USD.
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