The EUR/USD pair remained subdued for the fourth consecutive day on Wednesday, trading around 1.0530 during the Asian session. The pair faced significant pressure as the US Dollar (USD) gained strength, driven by market caution ahead of the release of the US Consumer Price Index (CPI) later in the day.
The US Dollar Index (DXY), which tracks the value of the USD against six major currencies, continued to rise, supported by increasing US Treasury yields. At the time of writing, the DXY stood around 106.40, with the 2-year and 10-year US Treasury yields at 4.16% and 4.23%, respectively. The market’s focus remains on the upcoming CPI data, which is expected to influence expectations for Federal Reserve (Fed) policy.
US CPI for November is forecast to rise to 2.7% year-over-year, up from 2.6% in October, while core CPI, excluding food and energy, is expected to increase by 3.3% YoY. If inflation shows signs of persistence, it could reduce the likelihood of a Fed rate cut in the near term. However, markets are still pricing in an 85.8% chance of a 25-basis point rate reduction by the Fed in its upcoming meeting, according to the CME FedWatch Tool.
Eurozone Awaits ECB Decision Amid Rate Cut Expectations
In the Eurozone, traders are focused on the European Central Bank’s (ECB) policy meeting, scheduled for Thursday. The ECB is widely expected to implement a 25 basis-point rate cut, lowering the Main Refinancing Operations Rate from 3.4% to 3.15% and the Deposit Facility Rate from 3.25% to 3.0%. The ECB’s decision will be closely scrutinized for any signals about the future direction of monetary policy in the region, adding to the subdued sentiment around the euro.
With both the US and Eurozone facing key economic data releases, the EUR/USD pair is likely to remain range-bound as traders await the outcome of these events.
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