EUR rose against USD and most of the other major currencies in the European session on Monday, benefiting from raised U.S. growth concerns and heightened expectations that the Federal Reserve will need to cut its interest rates sharply to avoid the recession, which put pressure on the U.S. dollar.
Friday's U.S. employment situation report for July, which showed a lower-than-anticipated hiring and a stronger-than-forecast deceleration in annual pay growth, added to worries that the U.S. economy is headed for a deeper slowdown while the Fed keeps interest rates at an elevated level. Against this backdrop, hopes surged that the U.S. central bank will deliver a larger - 50-basis-point - first rate decrease in September to support the economy.
According to CME FedWatch, markets now price in a 95.5% probability of a half-point cut at the Fed’s next policy meeting compared to 11.4% a week ago. In addition, markets repriced their expectations of a size of policy easing this year. They now see 125 basis points of rate reduction by the end of the year.