On Wednesday, the EUR/USD pair witnessed a modest recovery, advancing by approximately two-tenths of a percentage point to reach the mid 1.0600s. This uptick followed the release of the final estimates for Eurozone March Inflation data.
The lift in EUR/USD came in the wake of Tuesday’s publication of the Harmonized Index of Consumer Prices (HICP) final reading, which mirrored initial estimates by registering a year-on-year increase of 2.4%. This figure marked a slight decline from February’s 2.6% year-on-year reading. Additionally, the Core HICP, indicating a 2.9% rise year-on-year, remained consistent with flash estimates and demonstrated a marginal decrease from February’s 3.1%. Month-on-month readings aligned with initial projections.
The stability in the final inflation estimate tempered dovish sentiments regarding potential interest rate adjustments. Market speculation regarding a rate cut in June has intensified, as lower interest rates, or anticipation thereof, tend to dampen foreign capital inflows, thereby depreciating the Euro and suppressing the EUR/USD exchange rate.
The day’s volatility in the currency pair may also be influenced by speeches delivered by prominent ECB members, including ECB Executive Board Member Piero Cipollone, ECB Executive Board Member Isabel Schnabel, and ECB President Christine Lagarde. Their remarks could introduce further fluctuations in the pair’s movement.
ECB President Lagarde’s recent statement asserting the likelihood of an imminent rate cut, barring unforeseen developments, has reinforced expectations for monetary policy adjustment. Lagarde also highlighted the ECB’s vigilance regarding oil prices amidst escalating tensions in the Middle East.
Technical analysis suggests that the EUR/USD pair has entered oversold territory on charts, heightening the possibility of an upward correction in the near term.
As the market awaits further developments regarding Eurozone inflation and ECB monetary policy, the EUR/USD pair remains poised for potential shifts in momentum and direction.
