EUR/USD strengthens above 1.1600 as Fed’s Powell keeps door open for rate cuts

• EUR/USD gathers strength around 1.1620 in Wednesday’s Asian session.

• Fed’s Powell signaled that more interest rate cuts are in the cards.

• French PM backed suspending the unpopular pension reform law.

The EUR/USD pair gains ground to near 1.1620 during the Asian trading hours on Wednesday. The US Dollar (USD) softens against the Euro (EUR) after remarks from Federal Reserve (Fed) Chair Jerome Powell bolstered wagers on an interest rate cut this month. The Eurozone Industrial Production data for August is due later on Wednesday. 

Fed’s Powell said on Tuesday that a sharp slowdown in hiring poses a growing risk to the US economy, suggesting that the US central bank will likely cut its key interest rate twice more this year. His dovish comments weigh on the Greenback and create a tailwind for the major pair. Traders expect the Fed to lower its benchmark interest rate by 25 basis points (bps) to the 3.75%-to-4.00% range and then reduce it again in December.

The US government shutdown has delayed the September jobs report and other economic data. An update on the Consumer Price Index (CPI) is now scheduled for October 24, before the Fed's October 28-29 meeting. 

Across the pond, French Prime Minister Sebastien Lecornu suspended a landmark 2023 pension reform until after the 2027 presidential election in a bid to end the political turmoil that has gripped the country for months. 

“I will propose to parliament this autumn that we suspend the 2023 pension reform until the presidential election. There will be no increase in the retirement age from now until January 2028,” said Lecornu. The shared currency edges higher against the USD following the announcement. 

Traders will take more cues from the speeches from Fed officials later on Wednesday, including Stephen Miran, Christopher Waller and Jeff Schmid. Any hawkish remarks from the policymakers could lift the USD and cap the upside for the pair in the near term.