EURUSD:
On Wednesday, at the start of the European trading session, the EUR/USD pair continued to decline to 1.1635.
Traders reduced their bets on a rate cut by the US Federal Reserve (Fed) at its September meeting, which provided some support for the dollar. Financial markets have priced in the probability of such a cut at almost 84% and expect a rate cut of approximately 54 basis points (bp) by the end of the year.
Across the Atlantic, the main event on Wednesday will be the speech by European Central Bank (ECB) President Christine Lagarde. Statements by ECB policymakers may provide some clues about the outlook for interest rates in the eurozone. Forward contracts for the ECB’s official overnight base interest rate, the short-term euro rate (ESTR), suggest a 25 basis point (bp) rate cut by March and a deposit rate of 1.92% in December 2026.
Meanwhile, a potential agreement to legitimize or end Russia’s invasion of Ukraine could help limit the euro’s losses. US President Donald Trump said on Tuesday that preparations are underway for a meeting between Russian President Vladimir Putin and Zelensky, which could lead to a trilateral summit involving all three leaders. Any potential peace agreement implies lower energy costs and reduced geopolitical uncertainty in the eurozone, which typically provides some support for the single currency.
Trade recommendation: SELL 1.1600, SL 1.1645, TP 1.1550
