EUR/USD drops 0.4% as ECB rate cut expectations pushed to October

EUR/USD has declined 0.4% to 1.0820 after traders significantly reduced rate cut expectations for the European Central Bank's September meeting. Following yesterday's ECB policy decision, markets now price only a 15% probability of a September cut, down from 65% previously, with the first full cut now expected in October. The hawkish shift reflects ECB officials' concerns about persistent services inflation and wage growth pressures. The euro's decline accelerated during the European session as positioning adjusted to the new rate outlook. Technical indicators show EUR/USD breaking below the 1.0850 support level, with next support at 1.0800. Resistance now sits at 1.0880. The extended pause in ECB easing contrasts with expectations for potential Fed cuts later this year, though this differential may provide limited support for the euro if European economic data continues to disappoint.