EUR/USD Weakens on Diverging ECB-Fed Policy Expectations

EUR/USD declined as markets price in increased ECB easing risks while Federal Reserve rate cut expectations diminish. The pair faced selling pressure as investors anticipate the European Central Bank may accelerate its accommodative stance amid sluggish Eurozone growth concerns. Simultaneously, resilient US economic data has reduced market expectations for aggressive Fed rate cuts in 2024, supporting dollar strength. Gold prices also retreated alongside the euro weakness, while the Dollar Index strengthened, confirming broad USD demand. Oil markets showed mixed signals, adding to the complex fundamental backdrop. Technical indicators suggest further downside potential for EUR/USD, with key support levels being tested. The diverging monetary policy outlook between the ECB and Fed remains the primary driver, with the ECB potentially cutting rates more aggressively than previously anticipated. Traders should monitor upcoming ECB communications and US economic releases for confirmation of this policy divergence trend.