The EUR/USD currency pair remains stable around the 1.1625 mark during the early hours of the Asian session on Friday. Waller from the Federal Reserve indicated his intention to endorse maintaining the current interest rates during the upcoming September meeting. The ECB is anticipated to implement a second rate increase in September, according to the poll results. The EUR/USD pair is currently trading in a stable manner at approximately 1.1625 during the early hours of the Asian session on Friday. Traders are inclined to remain on the sidelines in anticipation of the crucial US employment report for August, set to be released later on Friday. Federal Reserve Governor Christopher Waller indicated on Thursday that he is inclined to maintain interest rates at their current level during the Fed’s September meeting, contingent upon the absence of unexpected developments in forthcoming inflation data. His remarks appeared to diverge from the hawkish statements made last week by Chairman Kevin Warsh.
The market-implied probability of a rate hike at the September policy meeting has decreased following Waller’s remarks, with traders now estimating a likelihood of only 50.2%, a decline from 63.2% observed on Wednesday, as indicated by the CME FedWatch tool. Attention will be focused on the US jobs data later today for new insights regarding the trajectory of US interest rates. Economists anticipate that the US economy will generate 56,000 jobs in August, with the Unemployment Rate expected to remain unchanged at 4.1% during this timeframe. Any signs of improvement in the US labour market could provide some support to the US Dollar against the Euro in the near term. Across the pond, the European Central Bank (ECB) is poised to increase interest rates at its September policy meeting, marking the second and final adjustment in what would constitute its briefest hiking campaign in 15 years, as indicated by a Reuters poll released on Thursday. Most economists contend that increases in energy prices are unlikely to instigate widespread inflationary pressures.
Strategists note that Eurozone rate expectations have shifted meaningfully in recent sessions, with markets now “extending hawkish pricing beyond the 25bpts of tightening priced for September, with nearly one full additional 25bpt hike priced by year-end.” They add that “yield spreads are offering renewed support” for the Euro, highlighting that their narrow “(2Y Germany-US yield spread) FV estimate is currently at 1.1623,” reinforcing the notion that the currency is trading close to its perceived fair value on rate differentials. Fed’s Waller delivered a moderately hawkish-but-conditional message, with the FXS Speechtracker score at 6.1/10, slightly below the 6.3/10 historical average, underscoring a marginal softening in tone relative to the established baseline. The key remark indicates that policy is likely to remain unchanged in September if August inflation demonstrates continued improvement; however, a “hot” print could prompt a rate hike. This clarification of the reaction function maintains a potential tightening risk, even as Waller observes “finally seeing some signs of disinflation,” robust GDP growth, and a satisfactory labour market. Emphasis on upside inflation risks, the possibility that only a small acceleration could justify tighter policy, and scepticism about PCE as the best real-time gauge all support a still-hawkish stance, albeit with growing confidence that underlying inflation is improving.
The FXS Fed Sentiment Index decreased by 2.06 points to 125.38, indicating a slight retreat in perceived hawkishness compared to recent communications reflected by the FXS Speechtracker. With the index still well above the neutral 100 mark, the Fed remains firmly in hawkish territory. However, Waller’s greater acknowledgement of disinflation and data-contingent approach suggests a gradual shift toward a more balanced, wait-and-see posture. In the daily chart, EUR/USD exhibits a bullish near-term bias, with the spot trading above the 100-day simple moving average. The Relative Strength Index around 57 indicates a favourable yet moderate momentum, suggesting that the recent gains may be corrective within a larger constrained framework, particularly as the price stays significantly below the upper Bollinger band. On the topside, immediate resistance is observed at the 100-day SMA around 1.1565, with a more formidable barrier aligning at the upper Bollinger band near 1.1712, where sellers are expected to reassert control if tested. On the downside, initial support is observed at the Bollinger midline near 1.1610. A breach below this level would reveal the lower band support around 1.1505, where a more pronounced pullback may experience a pause.
