EUR/USD edges higher above 1.1700 as Fed cut bets grow

• The Euro gains 0.20% to 1.1708 in a muted session driven by a softer Dollar and September Fed cut expectations.
• US traders' eye NFPs and ISM PMI, while Trump hints at a possible national housing emergency declaration.
• French election no-confidence vote on September 8 threatens stability, despite Ethe euro's 13% year-to-date advance.

EUR/USD advanced on Monday, gaining over 0.20% amid a thin liquidity trading session, as US financial markets were closed due to the Labor Day holiday. A soft US D.S. dollar and growing bets that the Federal Reserve will cut rates at the September meeting, boosted Ethe euro's appeal. At the time of writing, the pair trades at 1.1708 after bouncing off daily lows of 1.1686.

Thin holiday trading lifts Euro, while US.S. jobs data and French political turmoil loom ahead

Price action was muted during the day as traders digested last week's news, which included the firing of Fed Governor Lisa Cook, and inflation and growth data. In the meantime, the USU.S. President Donald Trump revealed that India is offering to reducing tariffs but said, "It's getting late, and they should have done so years ago."

The US Treasury Secretary Scott Bessent crossed the wires. He said that Trump may declare a national housing emergency this fall to address rising prices and dwindling supply, revealed according to an interview with the Washington Examiner.

In the meantime, EUR/USD traders are eyeing the release of August's US.S. Nonfarm Payroll figures on Friday. This and the Manufacturing PMI revealed by the Institute for Supply Management (ISM) would update the status of the jobs market and expectations for economic expansion, even though the latest Gross Domestic Product (GDP) figures showed a 3.3% increase on Q2 2025.

In Europe, attention is centered on the French election, with the no-confidence vote scheduled for 8 September. 8. Prime Minister Bayrou is expected to lose, which could trigger a reaction by the financial markets, and weigh on the shared currency, which so far has gained 13% since the beginning of the year.

Data-wise, the European Union (EU) HCOB Manufacturing PMI for August came in at 50.7, exceeding forecasts of 50.5, expanding for back-to-back months. Nonetheless, Germany's Purchasing Managers' Index failed to clear the 50 expansion-contraction threshold but hit its highest level in more than three years at 49.8.

Daily digest market movers: EUR/USD ignores US.S. inflation data, focus is on jobs

• Last Friday, the US.S. Core Personal Consumption Expenditures (PCE) Price Index, the Fed's favorite inflation gauge, rose by 2.9% YoY, as expected, above June's 2.8% increase. Headline inflation expanded by 2.6% YoY as foreseen, unchanged from the previous month's print.
• The University of Michigan (UoM) Consumer Sentiment for August deteriorated further, from 58.6 to 58.2. Inflation expectations for one year dipped from 4.9% to 4.8%, and for a five-year period dropped from 3.9% to 3.5%.
• Broad US Dollar weakness keeps the EUR/USD standing afloat above 1.1700. The US.S. Dollar Index (DXY), which tracks the performance of the Dollar against a basket of six currencies, is down 0.16% at 97.69.
• Across the pond, the European Central Bank (ECB) President Christine Lagarde said that she will continue to take the steps necessary to control inflation. She added that the equilibrium of the US.S. economy could be impacted if Trump removes the Fed Chair Jerome Powell, citing serious implications for the global economy.
• Lagarde's added that France is not currently in a situation where it would need an intervention by the International Monetary Fund (IMF).
• The latest ECB minutes showed that the central bank adopted a wait-and-see mode, with a high bar set for another rate cut. The ECB Governing Council noted that risks to the economy are tilted to the downside, due to an "escalation in global trade tensions."
• Expectations that the Fed will reduce rates at the September meeting continued to trend higher. The Prime Marketer Terminal interest rate probability tool had priced in an 85% chance of the Fed easing policy by 25 basis points (bps) to 4.00%--4.25%. The ECB is likely to keep rates unchanged, with an 89% probability, and only an 11% chance of a 25-bps cut.

Technical outlook: EUR/USD poised to challenge 1.1750 in the near term

The EUR/USD uptrend remains intact, extending its gains beyond 1.1700 and reaching a six-day high of 1.1736. It is worth noting that the Relative Strength Index (RSI), which had turned bearish, bounced back into bullish territory, indicating that buyers are in control.

A daily close above the August 22 high of 1.17420 would solidify the case for testing higher prices. The next area of interest would be 1.1800, and the year-to-date (YTD) peak of 1.1829. On the downside, a break below 1.1700, exposes the 50-day SMA at 1.1666, exposing the 20-day SMA at 1.1663, followed by the 100-day SMA near 1.1518.