If the figures come in close to expectations and not much higher, there is a strong chance the Fed will cut interest rates by 25 basis points at its September meeting. Meanwhile, media reports say that Christopher Waller, one of the Fed’s most dovish policymakers, is the leading candidate to replace Jerome Powell as Fed Chair when his term ends next year.
With the upcoming Trump-Putin meeting in Alaska in the spotlight, the US President has decided to extend lower tariffs on China for another 60 days, which has given the US dollar a short-term boost. This is positive news for markets in the near term, though the issue is likely to resurface as the new deadline approaches. The Alaska meeting will be the first between the US and Russian Presidents since June 2021 and will draw global attention, including from financial markets.
Given the complexity of the situation, it is hard to predict specific outcomes for the markets. Investors are also watching for a vote in Kyiv, which could signal whether hostilities will continue or if the chances for a truce are improving. While stock markets would likely gain from peace, both the euro and the US dollar could benefit in currency trading, making the final impact on the main currency pair uncertain.
The main highlight on today’s macroeconomic calendar is the release of US inflation data. Forecasts point to a slight year-on-year increase in both the headline and core measures.
If the inflation data matches this consensus, it should not have much impact on the likelihood of an interest rate cut at the next Federal Reserve meeting, which now stands slightly above 80%.
The main driver behind expectations for a cut next month is the recent labor market data, closely watched by Fed leaders, which was disappointing, particularly due to downward revisions to figures from previous months.
Ahead of important geopolitical events and macroeconomic data, the EUR/USD exchange rate is holding slightly above the 1.16 level. A clear move outside the 1.16–1.1660 range would likely signal the next short-term direction.
A downside breakout would offer more scope for a steady move, potentially paving the way for a test of the 1.14 support level.
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