The EUR/USD pair is trading with a mild negative bias, hovering near 1.0550 during Monday’s Asian trading session. Investors are positioning themselves ahead of a crucial week, with key economic events set to shape the currency pair’s direction.
Focus will first shift to the release of the US Consumer Price Index (CPI) for November on Wednesday, followed by the European Central Bank (ECB) interest rate decision on Thursday. These events are likely to provide critical insights into the future trajectory of US and Eurozone monetary policies.
US Inflation Data to Shape Fed’s Rate Cut Decision
The growing expectation of a quarter-point rate cut by the Federal Reserve (Fed) on December 18 has been fueled by the strong November employment report, which showed robust job creation, but not at a pace that would prevent the Fed from lowering rates to a range of 4.25% to 4.50% from the current 4.5% to 4.75%. As traders price in a likely Fed rate cut later this month, the CPI data on Wednesday will be a key piece of the puzzle. Annual consumer price inflation is expected to rise slightly to 2.7% in November, up from 2.6% in October, while core inflation—excluding food and energy—is projected to remain steady at 3.3%. A softer-than-expected inflation reading could increase market confidence in the Fed’s path of easing.
ECB Expected to Cut Rates, But Market Caution Prevails
On the European front, the ECB is expected to implement its fourth interest rate cut of the year during its final policy meeting of 2024 on Thursday. Analysts anticipate that the central bank will maintain its data-dependent stance, refraining from committing to a fixed rate path. However, any dovish remarks from ECB President Christine Lagarde during the subsequent press conference could weigh on the Euro (EUR) against the US Dollar, especially if the ECB signals more easing measures in 2025.
With both the Fed and ECB in focus, EUR/USD is likely to remain volatile, with inflation data and central bank rhetoric providing the catalyst for the next major move.
Related Topics:
