The euro rose in European markets on Wednesday against a basket of global currencies, marking its first gain in five sessions versus the US dollar. The rebound came as investors bought the euro from lower levels, while the dollars upward momentum paused in the forex market.

Expectations of a European rate cut in September declined following last weeks hawkish European Central Bank meeting. Investors now await key upcoming economic data from the eurozone especially July inflation figures to reprice those expectations.

Price Overview

EUR/USD today: The euro climbed 0.25% to $1.1573, from an opening price of $1.1546. The session low stood at $1.1545.

On Tuesday, the euro ended down 0.35% versus the dollar its fourth straight daily loss after hitting a five-week low of $1.1516 following a German-French backlash against the recent EU-US trade deal.

US Dollar

The US Dollar Index fell 0.2% on Wednesday, retreating from a five-week high of 99.14 points, reflecting a pause in the greenbacks advance against major currencies.

Beyond profit-taking, dollar levels declined as investors refrained from building new long positions ahead of the US Federal Reserves policy statement. Markets are looking for strong clues regarding the likelihood of a September rate cut.

The Fed concludes its crucial policy meeting later today. Markets widely expect rates to remain unchanged for the fifth consecutive meeting as officials assess appropriate policy for the worlds largest economy.

ECB Policy Outlook

Last week, the ECB held its key interest rates steady at 2.15% the lowest since October 2022 after having cut rates at the previous meeting for the seventh straight time.

The ECB opted to pause its easing cycle amid uncertainty surrounding future US trade relations.

ECB President Christine Lagarde said after the meeting, We are in wait-and-see mode, and added that the eurozone economy has shown resilience despite global uncertainty.

According to Reuters sources, a clear majority at the ECB meeting preferred to keep rates unchanged again in September.

Money markets now price in less than a 30% chance of a 25 basis-point ECB rate cut in September, down from 50% previously.

To reassess these probabilities, investors are watching closely for upcoming eurozone data and ECB official commentary.

Euro Outlook

At Economies.com Today, we expect that if the Federal Reserves comments turn out to be less hawkish than expected, the probability of a US rate cut in September will increase likely fueling further euro recovery against the dollar.