The EUR/USD pair finds support after dipping to the 1.0800 level during the Asian session, rebounding from last Thursday’s multi-week low. However, the upward momentum remains limited, with the pair hovering around 1.0835, unchanged for the day.
The US Dollar (USD) continues to face selling pressure for the third consecutive session, driven by growing concerns over stagflation in the US. Despite rising inflationary signals, USD bulls remain cautious, as expectations of a Federal Reserve (Fed) rate cut in June remain uncertain. The latest US Personal Consumption Expenditure (PCE) Price Index showed a 0.4% rise in February—its highest monthly gain since January 2024—pushing the annual rate to 2.8%.
Further reinforcing inflation concerns, the University of Michigan’s survey indicated that 12-month inflation expectations surged to their highest level in nearly two and a half years in March. This overshadowed a 0.4% increase in consumer spending last month, which followed a downward revision to January’s 0.3% decline. Additionally, uncertainty surrounding former US President Donald Trump’s trade policies is prompting the Fed to maintain a cautious stance on monetary easing. However, this backdrop has yet to generate significant strength for the USD or weigh heavily on the EUR/USD pair.
Meanwhile, the euro finds some stability amid easing fears of a trade conflict between the EU and the US. The European Commission has signaled readiness to offer concessions to avoid Trump’s proposed reciprocal tariffs, set to be announced on Wednesday. However, broader risk-off sentiment could lend support to the safe-haven USD, potentially limiting further gains for EUR/USD.
Traders now turn their focus to the preliminary German consumer inflation data for further direction. Overall, the current market dynamics suggest room for further appreciation in the EUR/USD pair, albeit with cautious optimism.
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