EUR/USD holds above 1.1100 mark amid fresh USD selling, ahead of Fed’s Powell

• EUR/USD attracts some dip-buying on Friday amid the dovish Fed-inspired USD slide.
• The Euro bulls seem unaffected by rising bets for more interest rate cuts by the ECB.
• Investors now look to Fed Chair Jerome Powell’s speech for some meaningful impetus.

The EUR/USD pair regains positive traction on the last day of the week and for now, seems to have stalled its pullback from the vicinity of over a one-year high touched on Wednesday. Spot prices currently trade around the 1.1125 region and draw support from the emergence of fresh selling around the US Dollar (USD).

Data published on Wednesday showed that US job growth over the past year to March was significantly weaker than initially estimated. Adding to this, a rise in the US Weekly Initial Jobless Claims further pointed to a cooling labor market, which, along with a slump in the US Manufacturing PMI, suggested that the economy is at risk of a slowdown. This, in turn, reaffirms market bets for an imminent start of the Federal Reserve’s (Fed) rate-cutting cycle in September and fails to assist the USD in capitalizing on the overnight goodish rebound from the YTD low. This, to a larger extent, overshadows Thursday’s mixed Eurozone PMI prints and turns out to be a key factor offering some support to the EUR/USD pair. 

In fact, HCOB’s preliminary composite Eurozone PMI, compiled by S&P Global, came in at 54.1 as compared to the estimates of 53.5, though marked a slight downtick from 54.3 in the previous month. That said, business activity in Germany – the Eurozone’s largest economy – contracted for a second consecutive month and by more than expected. Adding to this, the negotiated wage growth in the Euro area slowed to 3.55% for Q2 2024, from 4.74% in Q1 2024. This, in turn, strengthens the case for two more rate cuts from the European Central Bank (ECB) this year. This might hold back traders from placing aggressive bullish bets around the shared currency and cap any meaningful appreciating move for the EUR/USD pair. 

Meanwhile, the accounts of the ECB July policy meeting showed that the September meeting was widely seen as a good time to re-evaluate the level of monetary policy restriction. Adding to this, ECB Governing Council member Martins Kazaks voiced confidence in inflation returning to 2% as well as worries over the economy and said that he’s ready to discuss another interest rate cut at the September meeting. Hence, any subsequent move up might continue to confront some resistance, though the bearish sentiment surrounding the Greenback might continue to act as a tailwind for the EUR/USD pair.