EUR/USD continued its rally for the second consecutive session, trading around 1.1720 during the Asian session on Monday. The pair strengthened as the US dollar (USD) weakened after the August US inflation report increased the likelihood that the Fed will cut interest rates again in October.

The US Personal Consumption Expenditures (PCE) Price Index rose 2.7% year-on-year in August, compared to 2.6% previously. This figure was in line with analysts' projections. Core PCE, which excludes food and energy prices, reached 2.9% year-on-year during the same period, also in line with expectations.

The Fed made its first cut at its September monetary policy meeting, lowering interest rates by 25 basis points (bps) to 4.00%-4.25%. The market now prices a nearly 88% chance of a Fed rate cut in October and a 65% chance of another rate cut in December, according to the CME FedWatch Tool.

Traders will likely be watching the Fed's keynotes on Monday, including remarks 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.

The market expects the European Central Bank (ECB) to soon end its easing cycle after maintaining interest rates for the second time in September. Economic data remains mixed, with the services sector showing recovery but manufacturing weakness persisting.

Source: Newsmaker.id