Ella 
EUR/USD hovered around 1.1130 in European time on Wednesday, its highest level so far this year. EUR/USD is expected to retake the 2024 high of 1.1140 as the U.S. dollar (USD) continues to come under pressure due to growing optimism about the Federal Reserve (Fed)’s September rate cut.
The U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar against six major currencies, hovered around a seven-month low of 101.30.
The continued easing of U.S. inflationary pressures and cooling labor market conditions have convinced investors that the Federal Reserve will cut interest rates in September. However, traders remain divided on whether the first rate cut will be a large or gradual one. The CME FedWatch tool shows a 30.5% chance of a 50bp cut. The rest of the expectations are for a more nuanced 25bp cut.
On Wednesday, investors will focus on the minutes of the Federal Open Market Committee (FOMC) July policy meeting, which will be released at 18:00 GMT. At its July meeting, the Fed kept its key lending rate unchanged in the 5.25%-5.50% range for the eighth consecutive time. The Fed acknowledged that the scope of risks has expanded to both sides of the dual mandate (inflation and employment).
This week, Fed Chairman Jerome Powell’s speech on Friday at the Jackson-Hall (JH) Symposium (to be held Thursday-Saturday) will be the highlight, as it will provide new clues about a rate cut in September. “If we see inflation moving more or less as expected, economic growth remaining reasonably strong, and the labor market remaining consistent with current conditions, then I think there is a possibility of a rate cut at the September meeting,” Powell said at the press conference after the July monetary policy announcement.
