Soft US inflation data and Fed minutes reduce odds of a near-term rate hike, pressuring the USD and capping the Euro’s losses.
The EUR/USD pair fell to 1.1675 in early Asian trading Thursday, retreating from a recent surge. The decline follows softer US economic data and Federal Reserve minutes that signaled caution on further rate hikes unless inflation progress accelerates.
At its July meeting, the Fed held rates steady at 3.5%-3.75%, with dissenters pushing for sooner action. Recent data shows modest monthly inflation cooling, though key measures remain above the Fed’s 2% target. Markets now price a 32.7% chance of a September hike, down from 47% a month ago.
Meanwhile, the European Central Bank is expected to continue tightening, with a 90%-94% probability of a 25 basis points hike to 2.50% at its next meeting. The divergence in policy outlooks may limit further downside for the Euro.