EUR/USD remains on the defensive below 1.0850 ahead of ECB’s Lagarde speech, US GDP data

• EUR/USD weakens near 1.0835 in Wednesday’s early Asian session. 
• ECB’s Guindos hinted at a possible interest rate cut in September.
• US S&P Global Manufacturing PMI dropped to 49.5; Services PMI improved to 56 in July. 

The EUR/USD pair trades in negative territory for the third consecutive day around 1.0835 during the Asian session on Thursday. The major pair adds to the previous day’s losses amid a downbeat view of the Eurozone's economic outlook and rising expectation that the European Central Bank (ECB) would cut more rates in September. 

Earlier this week, ECB vice president Luis de Guindos hinted at a possible interest rate cut in September as the central bank will have more information to reassess the monetary policy situation. The ECB President Christine Lagarde said last week after holding policy rates that the rate cuts in September were "wide open” amid easing inflationary pressures. The further rate cuts expectation from the ECB is likely to weigh on the Euro (EUR) in the near term.

Across the pond, market players expect the US Federal Reserve (Fed) to start cutting interest rates in September. According to the CME FedWatch Tool, traders have priced in 100% odds of a 25 basis points (bps) rate cut, while data from the Chicago Board of Trade (CBOT) showed market participants estimate 53 bps of easing for 2024. 

The business activity in the US private sector continued to expand in July. The S&P Global Manufacturing PMI declined to 49.5 in July versus 51.6 prior, while the Services PMI rose to 56.0 in July from 55.3 in June, above the consensus of 54.4. The US S&P Global Composite PMI increased to 55.0 in July from 54.8 in the previous reading. 

Later on Thursday, investors will closely watch the speech by the ECB’s Lagarde, along with the advanced US Gross Domestic Product (GDP) for the second quarter (Q2). The US economy is estimated to grow 2.0%, compared to the previous reading of 1.4%.