• EUR/USD rises to near 1.1200 as the Euro gains despite deepening worries over Eurozone economic growth.
• The ECB is expected to cut interest rates once in any of the remaining two policy meetings this year.
• The next major trigger for the US Dollar will be the US core PCE inflation data for August on Friday.

EUR/USD extends its upside to near the yearly high of 1.1200 in Wednesday’s European session. The major currency pair gains as the US Dollar (USD) remains under pressure amid an improvement in investors’ risk appetite due to China’s massive stimulus plans announcement on Tuesday in an attempt to revive their economy from growing slowdown risks. Generally, investment flows to the US Dollar get reduced in times of cheerful market sentiment.

Apart from China’s massive stimulus, increasing Federal Reserve (Fed) large rate cut bets in November has also kept the US Dollar on the back foot. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges higher on Wednesday but remains close to the yearly low of 100.20.

The CME FedWatch tool shows that the likelihood of the Fed reducing interest rates by 50 basis points (bps) to the range of 4.25%-4.50% has increased to 60% from 37% a week ago. The Fed also started the policy-easing cycle on September 18 with a larger-than-usual rate cut of 50 bps as officials were concerned over declining labor demand.

This week, the major trigger for the US Dollar will be the United States (US) core Personal Consumption Expenditures Price Index (PCE) data for August, the Fed’s preferred inflation gauge, which will be published on Friday. The underlying inflation measure is estimated to have accelerated to 2.7% from 2.6% in July.