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EUR/USD traded with gains on Wednesday, up by 0.35% and above the 1.1600 figure for the second straight day as the Greenback is pressured by firm expectations of rate cuts by the Federal Reserve and the escalation of the trade-war between the US and China.

Euro rises for a second day as dovish Fed outlook and US-China conflict pressure the Greenback
 

The Euro trades at 1.1647 after hitting a daily low of 1.1601 as the Dollar reaches a six-day low, according to the US Dollar Index (DXY). The DXY, which tracks the performance of the US currency against a basket of six others, is down 0.37% at 98.66.

Discussions between Washington and Beijing had extended, since the Chinese began its export controls on rare earths and port fees to US vessels. US President Trump escalated the conflict after threatening to impose 100% additional tariffs on Chinese products, but refrained from that decision, saying that the US does not what to “hurt” China.

Nevertheless, both countries imposed port fees interchangeably, as tensions continue to rise between the nations.

Data-wise the US docket is scarce, but the Beige Book was released by the Fed, hinting a stagflationary scenario.

Across the pond, inflation figures in France came as expected, below the European’s Central Bank (ECB) 2% goal. In Spain, priced rose by 3% in September, well above the ECB’s target. Some ECB officials crossed the wires, like the Bundesbank President Joachim Nagel and Banque de France Governor Francois Villeroy de Galhau.

Daily market movers: EUR/USD rallies towards 1.1650 on Dollar weakness
 

• The Fed’s Beige Book announced ahead of the October 28-29 meeting, revealed that employment levels remained largely stable in recent weeks, while labor demand was generally subdued across most Districts and sectors.
• Overall economic activity showed little change since the previous report, with three Districts noting slight to modest growth, five reporting no change, and four indicating mild softening. Consumer spending edged lower, particularly in retail goods.
• US Treasury Secretary Scott Bessent said Washington could consider a longer pause on high tariffs for Chinese products in exchange for easing Beijing’s recently tightened restrictions on critical rare earth exports. “Is it possible that we could go to a longer roll in return? Perhaps. But all that’s going to be negotiated in the coming weeks,” Bessent told reporters during a press conference in Washington.
• On Tuesday, Fed Chair Jerome Powell was dovish, acknowledged the weakness of the labor market, adding that the central bank should move to more “neutral” interest rates.
• ECB's Joachim Nagel said the German economy is improving. Echoing some of his comments was Francois Villeroy, who said the global economy is surprisingly resilient, while also commenting that France can’t afford to fixate on short-term fiscal challenges and must find credible solutions for reducing its deficit.
• Industrial Production in the Eurozone (EZ) decelerated from 1.8% to 1.1% YoY in August, better than the expected -0.2% contraction.
• Money markets are fully pricing in a 25-basis-point rate cut at the Fed’s October 29 meeting, with odds at 97%, according to the Prime Market Terminal probability tool.

Technical outlook: EUR/USD dwindles at around 100-day SMA
 

EUR/USD’s technical outlook had improved but the pair remains neutral-to-bearish as it continues to trade above/below the 100-day Simple Moving Average (SMA) at 1.1644. The Relative Strength Index (RSI) slipped below the neutral 50 level last Friday, signaling that downside momentum is strengthening.

Immediate support is seen at 1.1600, followed by 1.1550 and 1.1500. A break below these levels would expose the August 1 cycle low near 1.1391. On the upside, resistance stands at 1.1650 and 1.1700, with a clear break above the latter opening the path toward 1.1800 and the July 1 high at 1.1830.
 

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