The EUR/USD pair records slight gains in early Asian trading, benefiting from a softer US Dollar (USD) and a prevailing risk-on environment. The Martin Luther King Jr. holiday in the US leaves risk sentiment as the primary driver of the pair’s movement.
ECB officials emphasize the need to await additional economic data before deciding on rate normalization. ECB chief economist Philip Lane mentions that important data expected by June will guide decisions on potential interest rate adjustments.
Last week, ECB President Christine Lagarde suggested that the most challenging part regarding inflation might be behind, and interest rates could be cut if confidence in inflation falling below 2% emerges.
In the US, the unexpected drop in the Producer Price Index (PPI) for December has raised expectations of potential interest rate cuts by the Federal Reserve (Fed) this year, with the markets anticipating 160 basis points of cuts.
Investors will closely monitor ECB speakers this week, including Villeroy and Nagel, along with multiple speeches by ECB President Lagarde. Additionally, the ECB Minutes are scheduled for release on Thursday, contributing to the overall market sentiment.
