• Euro holds firm as Greenback weakens amid escalating US-China trade tensions.
• Fed cut bets grow, with markets pricing in back-to-back 25 bps reductions in October and December.
• France is back in the spotlight as Parliament prepares for key no-confidence votes on Thursday.

The Euro (EUR) is holding firm against the US Dollar (USD) on Wednesday, with EUR/USD attempting to extend its recovery for a second consecutive day as the Greenback comes under modest pressure amid escalating US-China trade war and firm expectations of further interest rate cuts by the Federal Reserve (Fed).

At the time of writing, the pair is trading around 1.1621, easing slightly from a six-day high near 1.1645 hit earlier in the European session. Meanwhile, the US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major peers, is hovering around 98.88, down 0.18% on the day.

Trade headlines remain front and center, dominating market sentiment as the US-China trade conflict intensifies, with both sides ramping up threats and retaliatory measures. US Trade Representative Greer said on Wednesday that “China is exercising economic coercion,” calling Beijing’s export restrictions “a global supply chain power grab.” Greer added that the United States and its allies “will not accept China’s restrictions.”

US Treasury Secretary Bessent emphasized that “we want to help China, not hurt it,” but noted that the latest provocations show why “it’s important for President Trump to have emergency powers to impose tariffs.” Bessent confirmed that a series of meetings will be held this week to address China’s trade measures.

Meanwhile, expectations of further interest rate cuts continue to weigh on the US Dollar. Markets are pricing in almost full odds of two consecutive 25 basis-point reductions in October and December, according to CME’s FedWatch tool. Fed Governor Stephen Miran said on Wednesday that “the labor market has clearly weakened,” adding that “two more cuts this year sounds realistic.” Miran noted that he expects unemployment to edge slightly lower if policy continues to ease and projected that headline PCE inflation will return to 2% within about a year and a half.

In Europe, political developments in France remain in focus. Prime Minister Sébastien Lecornu’s decision to suspend President Emmanuel Macron’s pension reform until after the 2027 election has helped ease tensions and bring some short-term stability. However, with no-confidence votes scheduled for Thursday, the government still faces a major test that could determine the direction of French politics in the coming weeks.