Ella 
In early Asian trading on Tuesday, the euro fell to around 1.0890 against the US dollar. Recovering demand for the US dollar (USD) is weighing on EUR/USD. Traders will be closely watching U.S. retail sales in June and a speech by Federal Reserve official Adriana Kugler on Tuesday. On Thursday, the European Central Bank (ECB) interest rate decision will be in focus.
Traders have increased bets on a rate cut by the Federal Reserve in September. On Monday, Federal Reserve Chairman Jerome Powell said the central bank would not wait until inflation reaches its 2% target before cutting interest rates. “That said, if you wait until inflation falls all the way to 2%, you may have waited too long because the tightening measures that are being taken, or the level of tightening, are still having an impact and could push inflation below 2 percent,” Powell said.
Meanwhile, San Francisco Fed President Mary Daly said inflation was cooling, bolstering confidence that inflation is on the way to 2%. However, Daly added that more information is needed before an interest rate decision is announced. Expectations of a rate cut from the Federal Reserve could drag the dollar lower and boost the euro against the dollar.
The ECB, on the other hand, is expected to keep its main refinancing rate, marginal lending facility rate and deposit facility rate unchanged at its July meeting on Thursday at 4.25%, 4.50% and 3.75% respectively. The European Central Bank decided in June to cut interest rates for the first time since 2019 after keeping rates unchanged for nine consecutive months. Analysts expect the ECB to cut interest rates twice more this year, in September and December.
