EUR/USD hovers around 1.0900 amid falling inflation, focus on ECB’s Lagarde’s speech

• EUR/USD finds support above 1.0900 on the softer Eurozone inflation data.
• Eurozone HICP eased to 2.4% YoY in November vs. 2.9% prior, the slowest annual pace since July 2021.
• Markets anticipate the Fed won’t raise rates at any of its upcoming meetings and might start cutting rates in the middle of 2024.
• Investors await ECB President Lagarde's speech, US ISM Manufacturing PMI on Friday.

The EUR/USD pair hovers around the 1.0900 psychological mark after retracing from the multi-month high of 1.1017 during the early Asian trading hours on Friday. Falling inflation and a stagnant economy in the Eurozone fuel hopes that interest rates could soon be cut. Nonetheless, the weaker US Dollar (USD) might cap the downside of the pair. The major pair currently trades around 1.0902, up 0.16% on the day.

Data from Eurostat revealed on Thursday that inflation in the eurozone, as measured by the Harmonized Index of Consumer Prices (HICP) eased to 2.4% YoY in November from 2.9% in the previous reading, the slowest annual pace since July 2021. On a monthly basis, the inflation figure dropped 0.5% versus a 0.1% rise previously. The main drivers for the slowing in HICP were falling energy costs and lower growth in food and service prices.

The Eurozone inflation report has spurred investors on speculation that the European Central Bank will begin cutting its deposit rate as soon as next April. However, ECB President Christine Lagarde cautioned this week that it was not the time to start declaring victory as wage pressures remain strong.

Across the pond, the markets anticipate the likelihood that the Federal Reserve (Fed) won’t raise rates at any of its upcoming meetings and might start cutting rates in the middle of 2024. This, in turn, weighs on the US Dollar (USD) and acts as a tailwind for the EUR/USD pair.

About the data, the US Core Personal Consumption Expenditures Price Index (core PCE), rose 0.2% MoM and 3.5% YoY in October, in line with the expectation. Meanwhile, the Initial weekly Jobless Claims rose to 218K from the previous period week of 211K, below the 220K estimated. The Continuing Claims surged to 1.93 million, the highest level since November 27, 2021.

Market participants will keep an eye on ECB President Lagarde's speech on Friday for fresh impetus. In the American session, the US ISM Manufacturing PMI for November will be released and Fed Chair Jerome Powell is set to speak.