The EURUSD pair is treading water in Thursday’s early European session, trading near 1.1640 after bouncing from multi-week lows earlier this week. The pair’s movement reflects a market caught between political uncertainty in Europe and mounting expectations of a Federal Reserve rate cut, leaving traders cautious ahead of crucial US data releases.
Fed Dovish Tone Boosts Euro Sentiment
On Wednesday, New York Federal Reserve President John Williams fueled hopes for monetary easing during a CNBC interview, stating that “every meeting is live” and signaling that rates may move lower over time.
His remarks triggered a drop in US Treasury yields and softened the US Dollar, allowing the Euro to regain some ground after hitting multi-week lows. Markets now price in a 90% probability of a 25-basis-point cut in September, with traders also eyeing the potential for another reduction by year-end if inflation continues to cool.
Trump-Fed Tensions Cloud the Dollar Outlook
Adding pressure to the Greenback are renewed tensions between the White House and the Fed. President Donald Trump’s attempt to remove Fed Governor Lisa Cook earlier this week has raised fresh concerns about the central bank’s independence.
These political frictions, combined with expectations of lower US interest rates, have weighed on the Dollar, giving the Euro temporary support despite persistent bearish technical signals.
Political Uncertainty Weighs on the Euro
Despite its bounce, the Euro remains under pressure from political instability in France. Opposition parties have refused to support Prime Minister Françoise Bayrou in a September confidence vote, which could lead to the collapse of the government and fresh elections.
This turmoil has revived Eurosceptic rhetoric, keeping Euro bulls cautious and limiting any significant upward moves for the EURUSD pair.
Markets Await Key Data Triggers
Thursday’s economic calendar is relatively light, but traders are closely watching upcoming key macroeconomic releases:
Eurozone Indicators: Consumer confidence is expected to stay subdued at -15.5, while industrial confidence may improve slightly to -10.0. The Economic Sentiment Index is forecast to tick up to 96.0 from 95.8.
US GDP Revision: The second estimate for Q2 GDP is anticipated to rise slightly to 3.1% annualized, from the previous 3.0% reading.
PCE Price Index (Friday): This is the week’s main event, with headline PCE expected to hold at 2.6% YoY and core PCE edging up to 2.9%. The outcome will shape expectations for September’s FOMC meeting.
EURUSD Technical Picture: Bearish Bias Intact
From a technical perspective, EURUSD maintains a bearish tone despite its recovery from recent lows.
Immediate support is seen at 1.1585, a level closely watched by bears.
Resistance lies near 1.1700, where selling interest is expected to intensify.
Sustained trade below 1.1600 could open the door to further downside pressure in the coming sessions.
Market Outlook: Range-Bound but Volatile
The EURUSD pair is likely to remain range-bound in the short term, with support from Fed easing expectations counterbalanced by Eurozone political uncertainty.
Friday’s PCE data will be critical. A softer-than-expected reading could accelerate Dollar weakness and push EURUSD higher, while a hotter print could revive Dollar demand and retest key support levels.
Conclusion
The EURUSD pair remains in a cautious consolidation phase, with traders balancing Fed rate cut expectations against Eurozone political uncertainty. The upcoming US PCE Price Index release will be pivotal in shaping September’s FOMC policy outlook and could define the pair’s next directional move. Until then, the market is likely to remain range-bound but sensitive to macro headlines.
