- EUR/USD trades strongly near 1.0788 on the weaker US Dollar.
- The possibility of a March rate cut by the Fed seems now to be less likely after recent US PPI data.
- Lagarde warned against lowering interest rates too soon because wages might drive up inflation again later this year.
The EUR/USD pair trades on a stronger note below the 1.0800 psychological barrier during the early Asian trading hours on Monday. Investors await the FOMC Minutes and Eurozone PMI data this week for fresh impetus. US markets are closed on Monday due to the President's Day holiday. At press time, the major pair is trading at 1.0788, adding 0.10% on the day.
On Friday, the US Producer Price Index (PPI), a measure of prices received by producers of domestic goods and services, climbed 0.3% MoM in January, the biggest move since August. The core PPI, excluding food and energy, increased 0.5% MoM in January, also against expectations for a 0.1% gain. On an annual basis, the headline PPI rose 0.9% YoY, while the Core PPI climbed 2.0% from the previous reading of 1.7%.
The Federal Reserve (Fed) Chair Jerome Powell said the central bank needs greater confidence in inflation's downward trajectory before it can cut rates. The latest US economic data suggests more time may be needed. Traders will take more cues from the FOMC minutes for the January meeting, with the focus on any discussion around the timing of rate cuts.
On the other hand, European Central Bank (ECB) President Christine Lagarde stated that the disinflation process would have to advance further for the central bank to be sure that it is sustainable. Lagarde warned against lowering interest rates too soon because wages might drive up inflation again later this year. Markets have priced in 113 basis points (bps) of rate cuts this year, down from 150 bps just weeks ago.
The FOMC Minutes on Wednesday will be in the spotlight. Later this week, the preliminary Eurozone PMI data for February and US S&P Global PMI will be due on Thursday. These data could give a clear direction to the EUR/USD pair.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0800 ahead of Eurozone GDP, according to US CPI data
The EUR/USD pair trades with a bullish bias around 1.0815 during the Asian trading hours on Wednesday. Markets might turn to a cautious mood later in the day ahead of key economic data from the Eurozone and the US.
GBP/USD consolidates its gains above 1.2580, all eyes on US CPI data
GBP/USD consolidates its gains around 1.2590 during the Asian session on Wednesday. The major pair holds above the key 100-day EMA but remains capped under the 1.2600 hurdle. The US CPI and Retail Sales report for April will be in the spotlight.
Gold price trades with a mild positive bias, US CPI and PPI data loom
Gold price posts modest gains on the weaker US Dollar on Wednesday. The rising gold demand from robust over-the-counter market investments, consistent central bank purchases, and safe-haven flows amid Middle East geopolitical risk act as a tailwind for XAU/USD.
Ethereum bears attempt to take lead following increased odds for a spot ETH ETF denial
Ethereum is indicating signs of a bearish move on Tuesday as it is largely trading horizontally. Its co-founder Vitalik Buterin has also proposed a new type of gas fee structure, while the chances of the SEC approving a spot ETH ETF decrease with every passing day.
US CPI data expected to show slow progress towards 2% target
The US Consumer Price Index is set to rise 3.4% YoY in April, following the 3.5% increase in March. Annual core CPI inflation is expected to edge lower to 3.6% in April. The inflation report could influence the timing of the Fed’s policy pivot.