EUR/USD touches 1.13 after Fed’s Powell signals ready to cut rates

• EUR/USD tipped into 1.1300 for the first time in over a year on Friday.
• Fed policymakers open the door to rate cuts during Jackson Hole.
• Coming up next week: key EU and US inflation prints.

EUR/USD rallied into its second-best day of August, climbing seven-tenths of one percent as the US Dollar tumbles across the board. Market risk appetite is pinned into the ceiling after Federal Reserve (Fed) officials broadly tipped their hand to investors, signalling that the US central bank is finally ready to start cutting interest rates.

Forecasting the Coming Week: Recession concerns take over Fed’s easing

According to the CME’s FedWatch Tool, rate markets are pricing in roughly three-to-one odds of a double cut on September 18, with the rest of the rate board still committed to a single quarter-point cut. Bets of a 50 bps opening rate trim in September rose after Fed Chairman Jerome Powell, while speaking at the Jackson Hole Economic Symposium on Friday, openly admitted that the time has finally come for the US central bank to begin pushing reference rates down.

Coming up: EU, US inflation metrics loom ahead late next week

Next week will open with a notably quiet data docket, however key inflation data points for both the EU and the US loom ahead in the darkness. US Gross Domestic Product (GDP) growth figures will serve as a precursor event on Thursday, but Fiber traders will broadly be focusing on an inflation double header slated for next Friday. 

Preliminary EU Harmonized Index of Consumer Prices (HICP) inflation figures for August will kick off next Friday’s data docket, and the figures are widely forecast to show key EU inflation metrics continuing to cool toward the 2% annualized target set by the European Central Bank (ECB). On the US side, Personal Consumption Expenditure Price Index (PCE) inflation is expected to hold steady above the Fed’s own desired 2% target, with core PCE inflation for the year ended in July set to come in at or near the previous period’s 2.6%.

EUR/USD price forecast

Despite some hitches along the way, Fiber managed to squeeze out a fresh 13-month high on Friday, testing chart territory north of 1.1300. Despite a firm bullish presence in the order flow, intraday price action struggled to hold the key price level, but still wrapped up the trading week with a solid 1.51% gain, one of the pair’s best single-week performances since November of last year.

EUR/USD bids continue to stretch higher after the pair caught a bounce from the last swing low into the 200-day Exponential Moving Average (EMA) rising into 1.0850. Without a convincing break of 1.1300 on the table, bidders could see renewed short interest dragging price action back into the low side in the near-term.

EUR/USD daily chart