Softer US inflation and weaker jobs data reduce expectations for a Federal Reserve rate increase in September.
The EUR/USD pair climbed to 1.1580 in early Asian trading, extending gains as the US Dollar weakened. Markets now price a 65% chance the Federal Reserve will hold rates steady in September, down from earlier hike expectations, following softer US inflation and retail sales data.
A Reuters poll shows most economists expect the Fed to keep rates unchanged through year-end. The ECB, however, is likely to raise rates by 25 basis points in September, with a 90-94% probability, according to market tools.
Geopolitical tensions, including the US-Iran conflict, could support the USD as a safe-haven asset, potentially capping further EUR gains.