• EUR/USD exhibits strength near 1.1130 ahead of the FOMC minutes of its monetary policy meeting in July.
• The Fed kept interest rates steady for the eighth time in a row in July, but Jerome Powell acknowledged discussions over cuts.
• The ECB is expected to resume its policy-easing cycle in September.

EUR/USD hovers near 1.1130 in Wednesday’s European session, the highest level seen this year. The major currency pair aims to revisit 2024 highs of 1.1140 as the US Dollar (USD) remains under pressure amid growing optimism over Federal Reserve (Fed) interest rate cuts in September.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near a fresh seven-month low at around 101.30. 

Consistently easing United States (US) inflationary pressures and cooling labor market conditions have convinced investors that the Fed will reduce interest rates in September. However, traders remain split on whether this first interest rate reduction will be a jumbo or a gradual one. The CME FedWatch tool shows that the likelihood of a 50-basis-point (bps) interest-rate cut is at 30.5%. The rest expects a more nuanced 25-basis-point cut.

In Wednesday’s session, investors will focus on the Federal Open Market Committee (FOMC) minutes for the July policy meeting, which will be published at 18:00 GMT. In the July meeting, the Fed left its key borrowing rates unchanged in the range of 5.25%-5.50% for the eighth straight time. The Fed acknowledged that the scope of risks has widened to both aspects of dual mandate (inflation and employment).