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EUR/USD breaks higher s the market awaits the next Fed Chair nominee
Wednesday, 6 August 2025 18:25 WIB | EUR/USD |EUR/USD

The EUR/USD pair is consolidating gains near weekly highs as the US Dollar languishes, following an unexpectedly weak services sector report that cast further doubts on the momentum of the United States (US) economy. Renewed concerns about stagflation keep the US Dollar pinned near lows, while in Europe, retail consumption figures have failed to provide significant support to the Euro.

The Euro (EUR) is trading at 1.1580 in the early European session on Wednesday, after bouncing from 1.1530 lows on Tuesday. The pair holds most of the gains taken on Friday after the release of a grim US Nonfarm Payrolls (NFP) report that boosted expectations that the Federal Reserve (Fed) will be forced to cut interest rates in the coming months.

US services PMI figures released on Tuesday revealed that the sector's activity slowed down to levels close to stagnation in July, with the employment sub-index showing an accelerating decline, prices increasing to their highest reading in almost three years, new orders stalling, and export orders plunging.

These figures come after a sharp downward revision of last month's employment figures to confirm that the effects of Trump's tariffs are starting to filter into the US economy, hampering economic growth, and boosting inflation, a mix that will pose a serious challenge for the Federal Reserve when deciding on rates.

In the meantime, speculation that US President Donald Trump will replace Adriana Kugler's vacancy in the Fed Governor's board with a loyalist, and name the replacement for Chairman Jerome Powell well ahead of the end of his term, in May next year, might undermine confidence in the bank's independence and put additional pressure on the USD.

In Wednesday's calendar, the Eurozone retail sales will be the main attraction during the European session. In the US, Federal Reserve officials Susan Collins, Lisa Cook, and Mary Daly are due to speak, and their comments about the recent US macroeconomic data will be analyzed with interest for further clues about the outcome of September's monetary policy meeting.

Source: FXstreet

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