EUR/USD gains above 1.1700 due to rising Fed rate cut bets

• EUR/USD gains ground as the US Dollar weakens on increasing odds of further Fed rate cuts.
• US Personal Consumption Expenditures inflation rose to 2.7% YoY in August, compared to 2.6% prior.
• ECB nears end of easing cycle, with services rebounding but manufacturing slump persisting.

EUR/USD extends its gains for the second successive session, trading around 1.1720 during the Asian hours on Monday. The pair appreciates as the US Dollar (USD) weakens after the US August inflation report boosted the likelihood that the US Federal Reserve (Fed) will likely deliver another interest rate cut in October.

The US Personal Consumption Expenditures (PCE) Price Index climbed 2.7% year-over-year in August, compared to 2.6% prior. This figure was in line with analyst forecasts. The core PCE, which excludes food and energy prices, came in at 2.9% YoY during the same period, also matching expectations.

The Fed delivered its first cut in the monetary policy meeting in the September meeting, reducing rates by 25 basis points (bps) to 4.00%-4.25%. Markets are now pricing in nearly an 88% chance of a Fed rate cut in October and a 65% possibility of another reduction in December, according to the CME FedWatch Tool.

Traders will likely observe the Fedspeak later on Monday, including the speeches from Fed Governor Christopher Waller, Cleveland Fed President Beth Hammack, St. Louis Fed President Alberto Musalem, New York Fed President John Williams, and Atlanta Fed President Raphael Bostic.

Markets see the European Central Bank (ECB) nearing the end of its easing cycle after a second rate hold in September. Economic data remains mixed, with services showing recovery but manufacturing weakness persisting.