EUR/USD Steady Near 1.1100, Close to Eight-Month Highs

The EUR/USD pair is holding around 1.1080 during Tuesday’s Asian session, after easing back slightly from an eight-month high of 1.1087. This minor pullback is linked to a stronger US Dollar (USD) amid a rise in risk-averse sentiment. However, the USD might face challenges ahead as the likelihood of a 25 basis point rate cut by the US Federal Reserve (Fed) in September increases.

The CME’s FedWatch Tool indicates a 23.5% chance of a 50 basis point rate cut by the Fed, with a 76.5% probability of a 25 basis point cut in September.

On Monday, Minneapolis Fed President Neel Kashkari mentioned that discussions about potential interest rate cuts in September would be appropriate, citing concerns over a weakening labor market, according to Reuters.

The upcoming Jackson Hole Economic Symposium, starting Thursday, will be closely watched, particularly for Fed Chair Jerome Powell’s speech on Friday.

In the Eurozone, investors are waiting for key data on business activity and consumer prices that could impact the European Central Bank’s (ECB) decision in September. It is expected that the ECB will gradually reduce interest rates, though policymakers remain cautious about committing to a specific path due to the risk of price pressures rising again.

On Tuesday, the Harmonized Index of Consumer Prices (HICP) from the European Monetary Union and Producer Price Index figures from Germany are set to be released, which may influence the ECB’s policy direction.

Shaun Osborne, Chief FX Strategist at Scotiabank, noted that the EUR/USD recently edged slightly above 1.1050, driven largely by broad USD losses with limited other influencing factors.