Ella 
In the Asian session on Thursday, the EUR/USD broke its four-day winning streak and fell slightly to around 1.1145. The market is more confident that the Federal Reserve will start loose monetary policy in September, and the downside of the EUR/USD may be limited. Later on Thursday, the eurozone and the United States will release the preliminary value of the purchasing managers’ index (PMI) for August.
The minutes of the Federal Reserve’s July 30-31 meeting released on Wednesday showed that most Federal Reserve officials agreed last month that as long as inflation continues to cool, they may cut interest rates at the next meeting in September. Atlanta Federal Reserve Bank President Raphael Bostic said: “We may need to change our monetary policy stance sooner than I previously thought.”
Federal Reserve Chairman Powell’s speech at the Jackson Hole conference may provide some hints on the Fed’s interest rate policy path. The market expects Powell to send a signal on Friday that inflation is approaching the Fed’s 2% target. Any dove-like speech from Fed officials may cause some selling pressure on the dollar and boost the euro/dollar.
In the eurozone, ECB policymakers did not commit to a specific path for rate cuts, citing the expectation that eurozone inflation will remain near current levels for the rest of the year. However, ECB policymaker Olli Rehn said on Monday that the ECB may need to cut interest rates again in September due to continued economic weakness. The market believes that the probability of the ECB cutting the deposit rate by 25 basis points to 3.5% in September is close to 90%, and believes that the ECB will introduce at least one more rate cut before the end of the year.
