The EUR/USD pair maintained its upward trajectory for the fourth consecutive session, hovering around 1.0880 levels during Thursday’s Asian trading hours. The decline in the US Dollar (USD) is exerting pressure on the pair, attributed to an improved risk appetite prevailing in the market.
Wednesday’s release of lower-than-expected monthly Consumer Price Index (CPI) and Retail Sales data in the United States (US) bolstered the likelihood of multiple rate cuts by the Federal Reserve (Fed) in 2024. US CPI slowed to 0.3% month-over-month in April, falling short of the projected 0.4% reading, while Retail Sales remained flat, missing the anticipated 0.4% increase.
The US Dollar Index (DXY), which measures the performance of the USD against six major currencies, is currently hovering around 104.20. The weakening of the Greenback can be attributed to the decline in US Treasury yields, with the 2-year and 10-year yields standing at 4.71% and 4.32%, respectively, at the time of writing.
Meanwhile, on the Euro side, Wednesday saw the release of seasonally adjusted Gross Domestic Product (GDP) data for the Eurozone, which expanded by 0.3% quarter-on-quarter in the first quarter, meeting expectations. This growth signals a recovery from the 0.1% contraction observed in the previous two quarters. Additionally, the annual growth rate aligned with expectations at 0.4%.
The Euro is finding support from increasing expectations for a convergence in monetary policy between the Eurozone and the US. The European Central Bank (ECB) is anticipated to consider rate cuts during its upcoming meeting in June, while market sentiments suggest the Fed may initiate interest rate cuts from September onwards, especially after core inflation slowed in April for the first time in six months.
