EUR/USD recovers some lost ground near 1.0660, eyes on FOMC meeting

• EUR/USD posts modest gains around 1.0665, up 0.07% on the day.
• The market expects the Federal Reserve (Fed) to hold interest rates steady at its policy meeting on Wednesday.
• European Central Bank (ECB) President Lagarde said the potential of further rate cuts was not considered among policymakers.
• Federal Open Market Committee (FOMC) meeting on Wednesday will be closely watched by traders.

The EUR/USD pair recovers its recent losses after bouncing off the multi-month low of 1.0631 during the early Asian session on Monday. Meanwhile, the US Dollar Index (DXY) posts its ninth consecutive weekly gain of around 105.30, bolstered by the upbeat US economic data. The major pair currently trades near 1.0665, gaining 0.07% on the day.

On Friday, the Federal Reserve Bank of New York reported that the Empire State Manufacturing Index in August improved to 1.9 from -19 in the previous reading, above the market consensus of a 10 decline. Additionally, Industrial Production rose by 0.4% MoM from July’s reading of 1% and beat the market expectation.

Furthermore, the University of Michigan revealed that the preliminary Consumer Sentiment Index for September declined from 69.1 forecasts to 67.7. While five-year Consumer Inflation Expectation came in at 2.7% versus 3% prior.

The market expects the Federal Reserve (Fed) to hold interest rates steady at its policy meeting on Wednesday while keeping one more rate hike on the table. Fed Chairman Jerome Powell will later hold a press conference with no major changes expected from the Fed. However, a dovish stance from official might trigger a decline in the US Dollar (USD) and acts as a tailwind for the EUR/USD pair.

On the Euro docket, the European Central Bank (ECB) President Christine Lagarde stated on Friday that the potential of further rate cuts was not considered among policymakers. She added that the ECB would maintain interest rates high for a long period and might raise them again if necessary. It's worth recalling that the ECB raised its key interest rate to a record high of 4% last week but signaled that its 10th consecutive rate rise would likely be the last. This, in turn, might drag the Euro lower against the Greenback.

Looking ahead, the Federal Reserve monetary policy meeting on Wednesday will be a closely watched event. Market players expect the Fed to keep interest rates unchanged. On the Euro docket, the Eurozone Harmonized Index of Consumer Prices (HICP) for August will be released on Tuesday and the preliminary HCOB Composite PMI for September will be due on Friday. Traders will take cues from these figures and find the trading opportunities around the EUR/USD pair.