EUR/USD slips to near 1.1700 despite diverging Fed-ECB policy outlooks

• EUR/USD depreciates as the US Dollar gains ground despite Fed rate cut bets.
• US Nonfarm employment for March 2025 for March 2025 will likely be revised down by 911,000.
• The European Central Bank is expected to keep rates unchanged for the second consecutive meeting on Thursday.

EUR/USD remains subdued after registering around 0.5% losses in the previous session, trading around 1.1700 during the Asian hours on Wednesday. The pair faced challenges as the US Dollar (USD) gained ground despite the firming likelihood that the Federal Reserve (Fed) will start cutting interest rates as soon as next week. The CME FedWatch tool indicates a pricing in more than 93% of a 25-basis-point (bps) rate cut by the Fed at the September policy meeting, up from 86% a week ago.

US Nonfarm Payrolls Benchmark Revision for March 2025 will likely be revised down by 911,000, or about 76,000 fewer jobs per month, signaling a weaker labor market than previously estimated. The final benchmark revision will be issued in February 2026 with the publication of the January 2026 Employment Situation news release," the BLS noted in its press release.

Traders await US inflation reports that could provide more cues on Fed policy outlook. The August US Producer Price Index (PPI) is scheduled for release on Wednesday, followed by the Consumer Price Index (CPI) on Thursday.

The European Central Bank (ECB) is widely expected to keep rates unchanged for the second consecutive meeting on Thursday, supported by steady growth and inflation hovering near the target. Traders will likely observe the meeting for any guidance on the central bank's outlook for the rest of the year.

The French parliament voted on a vote of no confidence on Prime Minister François Bayrou as parties could not agree to budget cuts, forcing President Emmanuel Macron to appoint the country's fifth PM in less than two years.

Traders also keep their eyes on the geopolitical situation after Poland placed its air defenses on high alert, following a warning from Ukraine's Air Force. Ukraine warned of a suspected Russian drone incursion into Polish airspace, breaching the North Atlantic Treaty Organization (NATO) airspace.