During the European session on Thursday (September 11), foreign exchange market volatility remained relatively low in recent weeks, with the euro correcting against the US dollar for three consecutive days. The euro has not been able to break through the 1.18 mark since early July. It is currently trading around 1.1683, down 0.09%.

However, the exchange rate trend is far from as calm as the US political and economic situation appears. Commerzbank currency analyst Michael Fister noted that the US government is still pushing to remove Lisa Cook from the Federal Open Market Committee (FOMC) (yesterday, the US government appealed the ruling that temporarily allowed her to remain in office); the August labor market report was significantly weaker than expected; and this week's job growth data for the period April 2024 to March 2025 was revised downward, with the downward revision significantly exceeding market expectations.



At present, at 20:15 Beijing time, the European Central Bank is about to announce the September interest rate, but the expectation that the European Central Bank will maintain the interest rate unchanged has made the market pay more attention to the CPI data released by the United States at 20:30.

Risk of an upside surprise in US inflation data is higher

“As for EUR/USD? It’s up 0.5 cents since last Thursday.

If it were this spring, such a surge could have occurred in a matter of minutes, driven by this series of events. But is this unusually low volatility? After all, it is the summer trading season.

Ultimately, it’s important to look at it against a benchmark: Last July, a weak U.S. labor market report boosted market volatility, and in September, a 50 basis point interest rate cut occurred.

But the current pattern is markedly different from previous years – in particular, the standard deviation levels from early July to late September between 2017 and 2021 are similar to what we are observing this year.”

Traders can try to trade a 50 basis point U.S. rate cut

What triggers are expected to provide new directions for the foreign exchange market?

If a fundamental upward revaluation of the euro against the dollar is to be achieved, a core catalyst will most likely be needed to increase the likelihood of faster rate cuts and the extent of rate hikes by the Federal Reserve.

One scenario is that US inflation data declines significantly, which will allow the Fed to focus more on its second policy mission - addressing the weakening US labor market.

Another scenario is a surprise 50 basis point rate cut next week. In this scenario, the euro could reach 1.18 against the dollar again. This coincides with the euro's recent three-day correction, giving euro bulls a discount.

Technical Analysis <br/>EUR/USD is in a large bullish flag consolidation. The negative line on September 9 indicates that the bullish flag is retracing after a sudden breakout.

The euro is more likely to continue to fluctuate in the relatively narrow range of 1.165-1.175 against the US dollar.

A sustained breakout of EUR/USD is only possible if it becomes clear that the Fed will initiate further significant rate cuts in the coming months, the ECB shows no signs of further rate cuts, and Donald Trump continues to undermine the Fed's independence.


(Euro/USD daily chart, source: Yihuitong)

At 19:10 Beijing time, the euro was trading at 1.1684/83 against the US dollar.