EUR/USD climbs as Fed cut bets weigh on US Dollar

• Euro rebounds from 1.1716 to 1.1763 as markets fully price 25 bps September Fed cut, slim odds for 50 bps.
• US Retail Sales expected weaker in August, while Industrial Production slowdown adds to pressure on Greenback.
• Eurozone focus turns to ECB's Escriva speech, Italy Inflation, ZEW Surveys, and bloc-wide Industrial Production data.

EUR/USD advanced over 0.21% on Monday as market participants shrugged off the downgrade to French's sovereign credit rating, as political turmoil remains. Nevertheless, expectations of the first rate cut in nine months of the Federal Reserve, downward pressured the US Dollar. The pair trades at 1.1763 after bouncing off daily lows of 1.1716.

Euro rises 0.21% after shrugging off France downgrade, traders focused on Fed, US data, and ECB speakers

Financial markets narrative hasn't changed with the Federal Open Market Committee (FOMC) meeting right around the corner. Money markets had fully priced in a 25-basis points rate cut by the Fed, with a slim chance of a "jumbo size" 50 bps cut, as depicted in Prime Market Terminal interest rate probability tool.

Besides this, the US economic docket will face the release of Retail Sales data on Tuesday, with estimates suggesting that sales dipped in August. Additionally, the Fed is expected to announce that Industrial Production continued to slow down in August.

Across the pond, the docket will feature a speech by European Central Bank (ECB) member Jose Luis Escriva. Data-wise, traders will eye Italy's inflation print, the ZEW Survey in Germany and the Eurozone for September, and Industrial Production for the Euro area.

Daily market movers: Euro boosted by ECB's Schnabel comments

• EUR/USD extended its gains, despites Fitch France's sovereign credit rating from AA- to A+ due to a political deadlock expected after elections. It was also boosted by ECB's Isabel Schnabel comments that "interest rates are in a good place as inflation stabilizes around our 2% target, and the economy remains resilient at full employment."
• US Retail Sales are projected to slow in August, rising 0.3% MoM versus 0.5% previously, which may further pressure DXY downward.
• Industrial Production for the same month is expected to drop -0.1% MoM, a tenth lower from the previous month print.
• The US Dollar Index (DXY), which measures the greenback against a basket of six peers, is down 0.28% at 97.34.
• Fitch Ratings Agency expects two 25 basis rate cuts, each in September and December, with three more reductions penciled in 2026. Conversely, the ratings agency does not project any rate cuts by the European Central Bank (ECB) again.
• Across the pond, the European Central Bank (ECB) held rates unchanged, adopting a meeting-by-meeting and data-dependent approach, while not pre-committing to a set path on interest rates.

Technical outlook: EUR/USD stays firm above 1.1750, eyes on 1.1800

EUR/USD uptrend remained intact on Monday, though the pair is shy of cracking the latest cycle high hit on September 9 at 1.1779. This could open the path to challenge 1.1800, setting the stage to test the year-to-date (YTD) high of 1.1829.

On the flip side, if EUR/USD slides below 1.1750, sellers could drive the exchange rate to 1.1700. A breach of the latter will expose the 20-day SMA at 1.1688 and the 50-day SMA at 1.1660.