EUR/USD strengthens to near 1.1150 ahead of Powell’s Fed speech

• EUR/USD is gaining ground around 1.1140 in the Asian session on Thursday.
• Dovish comments from Fed officials this week could continue to undercut the USD.
• HSBC analysts expect the ECB to cut rates by 25 bps at each meeting from October to April next year.

EUR/USD is trading firmer near 1.1140 during Asian trading hours on Thursday, broadly supported by the weaker greenback. Several US Federal Reserve (Fed) officials are due to speak on Thursday, including Fed Chairman Jerome Powell. Also, weekly US initial jobless claims, durable goods orders and annualized US gross domestic product (GDP) for the second quarter (Q2) will be released.

Traders are waiting for new catalysts on how aggressive future U.S. rate cuts would be. Many analysts see the Fed increasing jumbo rate cuts again in the November meeting. “Given his comments at Jackson Hole and what I heard from him at the press conference, yes, I think Chairman Powell would be inclined to cut another 50 basis points if there was more weakness in the labor market.” , said Mr Matthew Luzzetti, US Chief Economist. at Deutsche Bank.

Earlier this week, Chicago Fed President Austan Goolsbee said policymakers “cannot be behind the curve” if the economy is to have a soft landing. Meanwhile, Atlanta Fed President Raphael Bostic noted that the US central bank does not need to go on a “crazy whore” to cut rates. Fed Governor Adriana Kugler said on Wednesday that she “strongly supported” the central bank’s decision last week, adding that it would be appropriate to cut rates further if inflation continues to fall as expected. Traders will take more cues from Fedspeak on Thursday. Any dovish remarks from Fed officials this week could trigger bets for another excessive rate cut by the Fed, dragging down the greenback against the euro (EUR).

Survey data released earlier this week showed business activity in the euro zone as a whole contracted sharply, sparking speculation that the European Central Bank (ECB) will cut interest rates again. HSBC analysts said on Wednesday they now expect the ECB to cut interest rates by 25 basis points (bps) at each meeting from October to April next year, given the weakening economic data.