EUR/USD retraces its recent gains, trading around 1.0870 during the European session on Tuesday. Traders are likely awaiting the release of the leading Consumer Confidence data by the European Commission (EC) later in the day, which is expected to indicate an economic downturn with an expected reading of -13.2 for July, in comparison with the previous -14.0 reading.

In an interview with Europa Press on Tuesday, European Central Bank (ECB) Vice President Luis de Guindos remarked that inflation data is almost exactly as projected. Guindos noted that September is a more suitable month for making decisions compared to July, given the current high level of uncertainty, and emphasized the need for prudence in decision-making.

Most expectations are centered around the possibility of two more cuts by the Federal Reserve (Fed), although scenarios involving one or even three cuts are still in play. Meanwhile, for the European Central Bank (ECB), there is a strong belief that there will be two more reductions in key interest rates by the end of the year.

The upside of the US Dollar may be limited as expectations rise for a Federal Reserve (Fed) rate cut in September. Last week, Fed Chair Jerome Powell expressed increased optimism about recent progress on inflation. Additionally, Fed Governor Christopher Waller indicated that the time to lower the policy rate is approaching.

In US politics, Democrats have rallied behind Vice President Kamala Harris as the leading candidate for the presidential nomination. NBC News projected that Harris has secured endorsements from a majority of the Democratic Party’s pledged convention delegates. The threshold for securing the nomination is 1,976 delegates, and NBC estimates that Harris has received support from 1,992 delegates through spoken or written endorsements.

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