- EUR/USD weakens to around 1.1635 in Wednesday’s Asian session.
- De-escalating US-China tensions weighs on the Euro.
- Fed is widely expected to cut its benchmark interest rate by 25 bps at the conclusion of its October meeting.
The EUR/USD pair loses ground to near 1.1635 during the Asian trading hours on Wednesday. Optimism surrounding US-China trade deals weighs on the riskier currency, like the Euro (EUR) against the US Dollar (USD). Traders brace for the Federal Reserve (Fed) interest rate decision later on Wednesday. On Thursday, the attention will shift to the European Central Bank monetary policy meeting.
US President Donald Trump said on Wednesday that he expects to reduce US tariffs on Chinese goods in exchange for Beijing’s commitment to curb exports of fentanyl precursor chemicals, per Reuters. US Secretary of the Treasury Scott Bessent stated that he also anticipated that the Chinese officials would agree to increase purchases of US-grown soybeans, enhance cooperation with the US to halt the flow of chemicals used to manufacture fentanyl, and sign off on a finalized TikTok deal.
Traders will closely monitor the meeting between Trump and his Chinese counterpart Xi Jinping on Thursday in South Korea to decide on a framework that defuses trade tensions between the world’s two largest economies. Positive developments surrounding trade negotiations could lift the Greenback and act as a headwind for the major pair.
On the other hand, the Fed is expected to cut its benchmark interest rates by 25 basis points (bps) at its October meeting on Wednesday, bringing the Federal Funds Rate target to 3.75%-4.00%. Fed Chair Jerome Powell’s press conference will be closely watched, as it might offer some hints about the US interest rate path and provide insight into the economic outlook. Any dovish remarks from the Fed officials could drag the USD lower against the EUR.
Across the pond, the ECB is anticipated to hold interest rates steady on Thursday, marking the third consecutive meeting with no change to the key deposit rate. ECB President Christine Lagarde indicated that the current monetary policy is “in a good place” and will adopt a data-dependent approach without pre-committing to a future rate path.
