The latest inflation report in Germany has caused the EUR/USD to retreat, as the likelihood of another interest rate cut by the European Central Bank (ECB) increases. With the EUR/USD trading at 1.1021, investors are bracing for a potential 25 bps rate cut on Thursday.
EUR/USD Retreats as German Inflation Fuels Expectations of ECB Rate Cut
German inflation fell to 2%, the ECB’s goal, prompting expectations of a quarter-point rate cut by the central bank. Analysts predict that the ECB will maintain a restrictive policy stance to combat inflation risks while revising down economic growth and inflation projections.
Money market traders are factoring in 50 to 75 basis points of cuts by the end of the year, as the ECB prepares to update its economic outlook.
Meanwhile, the upcoming US Consumer Price Index (CPI) data release could influence Federal Reserve rate expectations. A lower-than-expected CPI report may increase the likelihood of a 50 bps rate cut, although gradual policy adjustments are more likely.
The CME FedWatch Tool indicates a 70% probability of a 25 bps rate cut and a 30% chance of a 50 bps cut.
EUR/USD Price Forecast: Technical Outlook
From a technical perspective, the EUR/USD remains neutral with an upward bias. A break below key support levels could lead to further downside, while a breach of resistance at 1.1091 could signal a bullish trend.
Euro FAQs
For those looking to understand the Euro and its impact on the financial markets, here are some frequently asked questions:
- What is the Euro and how does it affect global transactions?
- What role does the European Central Bank (ECB) play in managing the Eurozone?
- How does Eurozone inflation data influence the Euro’s value?
- What economic indicators impact the direction of the Euro?
- Why is the Trade Balance important for the Euro?
Understanding these key factors can help individuals make informed decisions about their finances and investments.