EUR/USD Holds at 1.1700 as Eurozone Q2 GDP and US PPI Data Loom

EUR/USD Holds at 1.1700 as Eurozone Q2 GDP and US PPI Loom

The EUR/USD currency pair is holding steady at around 1.1700 during Thursday’s Asian session, as market participants await the release of key economic data from both the Eurozone and the United States. For the second consecutive day, the pair has shown little movement, with the US Dollar (USD) seeing a slight technical rebound.

Focus on Eurozone GDP and US Economic Data

Investors are looking ahead to the release of the Eurozone's second-quarter Gross Domestic Product (GDP) figures later today. These numbers will provide further insight into the health of the Eurozone economy, which is expected to influence the European Central Bank's (ECB) future monetary policy stance.

At the same time, traders will be watching for updates on the US Producer Price Index (PPI) and weekly Initial Jobless Claims, which could shape the outlook for US inflation and employment. Any weak readings from the PPI or higher-than-expected jobless claims may further fuel market expectations for more Fed rate cuts.

US Fed Rate Cut Expectations Mount

Market participants are increasingly confident that the Federal Reserve (Fed) will reduce interest rates at its next meeting in September. According to CME's FedWatch tool, there is now a 94% probability that the Fed will implement a 25 basis point cut at the September meeting.

In a recent interview, US Treasury Secretary Scott Bessent suggested that the Fed may consider a more aggressive 50 basis point rate cut for September. Bessent indicated that short-term interest rates should be around 1.5-1.75% lower than the current effective benchmark rate of 4.33%. If these expectations materialize, the US Dollar could face further downward pressure, benefiting the EUR/USD pair.

US Dollar Faces Pressure from Rate Cut Speculation

While the EUR/USD has remained range-bound for now, the growing prospects of rate cuts by the Fed could weaken the USD in the near term. If US inflation continues to show signs of slowing, and the labor market shows weakness, further cuts could be on the horizon, potentially keeping the EUR/USD pair well supported.

The combination of the Fed's dovish outlook and anticipation of weaker US economic data has put the USD on the backfoot. However, the focus remains on the upcoming economic releases, which will likely dictate the next move for EUR/USD.