The EUR/USD pair saw some dip-buying on Friday as the US Dollar continued to slide due to dovish statements from the Federal Reserve. Despite rising expectations for more interest rate cuts by the European Central Bank (ECB), Euro bulls remained resilient. Investors were eagerly awaiting Fed Chair Jerome Powell’s speech for potential market-moving information.
The pair regained positive momentum on Friday, trading around the 1.1125 region after pulling back from a one-year high earlier in the week. The weakening US Dollar was supported by data showing weak US job growth, an increase in Weekly Initial Jobless Claims, and a slump in the US Manufacturing PMI. These factors increased the likelihood of a Fed rate cut in September and dampened the USD’s performance against the Euro.
Although Eurozone PMI data was mixed, with business activity in Germany contracting and wage growth in the Euro area slowing, the Euro managed to hold steady against the USD. The European Central Bank (ECB) was expected to announce two more rate cuts this year, further limiting the Euro’s upward potential. However, the sentiment surrounding the USD remained bearish, providing some support to the EUR/USD pair.
ECB’s July policy meeting indicated that September would be a good time to reassess monetary policy restrictions, with discussions around potential interest rate cuts. ECB Governing Council member Martins Kazaks expressed confidence in inflation returning to 2% but also voiced concerns about the economy, hinting at another rate cut in September. This, along with the dovish Fed stance, could continue to propel the EUR/USD pair upwards despite potential resistance levels.
Investors were closely monitoring Fed Chair Jerome Powell’s speech, as his statements could provide clarity on future monetary policy decisions. Powell took office as Chair of the Federal Reserve in February 2018, and his speeches have the potential to impact market sentiment and currency movements. The next speech was scheduled for August 23, 2024, with uncertainty surrounding the content but potential for market reactions depending on Powell’s remarks.
