EUR/USD Tumbles Despite Fading Fed Hike Odds

The EUR/USD pair has been trading lower after experiencing a sharp surge in the previous session. Despite this, the potential downside might be limited due to the Federal Reserve's meeting minutes and soft US economic data weighing on the Greenback.

The Fed kept its benchmark interest rate steady at 3.5%-3.75% at its July policy meeting, with some officials calling for action soon to bring down inflation. However, recent data releases have shown modest price increases on a monthly basis, keeping market expectations for a Fed rate hike in check.

Markets are now pricing a 32.7% chance of a Fed rate hike at the upcoming policy meeting, down from 47% a month earlier. On the other hand, financial markets are pricing in a continuation of the European Central Bank's hiking cycle, with a 90-94% probability of a 25 basis points hike to 2.50% at the next policy meeting.