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Euro US Dollar (EUR/USD) Retreats from Monthly High amid Data Lull

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Euro US Dollar (EUR/USD) Subdued ahead of CPI figures

The Euro US Dollar (EUR/USD) exchange rate is struggling to extend its recent gains today amid a lack of notable data in both the US and Eurozone.

At the time of writing the EUR/USD exchange rate is trading at $1.0942, virtually unchanged from this morning’s opening rate.

Euro (EUR) Mixed despite Hawkish ECB Commentary 

The Euro (EUR) is trading without a clear direction today against its major peers, with notable data lacking in the Eurozone.

With macroeconomic releases in short supply, EUR investors look towards the latest European Central Bank (ECB) commentary for an indication of where the central bank currently stands in relation to monetary loosening. Governing council member Peter Kazimir expressed a preference for higher interest rates in the Euro bloc.

Kazimir stated:

‘Rushing the move is not smart nor beneficial… Upside risks to inflation are alive and kicking. [We] need more hard evidence on inflation outlook, only in June will we reach the confidence threshold on that.’

However, a lack of evident support from Kazimir’s cohorts left his hawkish rhetoric to seemingly fall on deaf ears, offering little support to the common currency. In contrast to Kazimir’s restrictive stance, economists from leading Eurozone banks have indicated that a spring rate cut could well remain on the cards.

Amid a lack of supporting data, mixed opinions surrounding ECB monetary policy and the lack of a unitedly hawkish consensus from the central bank leaves the Euro on the defensive today.

 US Dollar (USD) Muted ahead of Inflation Data

The US Dollar (USD) is wavering near a monthly-low today ahead of market moving data releases, due later in the week.

A lack of notable US figures leaves the ‘Greenback’ rangebound today, with investors are seemingly reluctant to place any aggressive bets on USD ahead of high-impact inflation data due out in tomorrow’s session.

Coming off the back of last week’s disappointing employment data, dialled up Federal Reserve interest rate bets also serve to weigh heavily on the US Dollar throughout today’s data light session.

Economists at Bloomberg noted:

‘The FOMC has been very reactive to negative data surprises, as evidenced by Fed Chair Jerome Powell’s quick dovish pivot in December after a slight weakening in the labour market at the time. Given our expectation that the labour market will cool more quickly ahead, we expect the Fed to cut rates in May — earlier than market expectations for June.’

However, gloomy trading conditions are keeping the safe-haven ‘Greenback’ afloat entering into the afternoon, cushioning USD’s downside.

Euro US Dollar Exchange Rate Forecast: Inflation Data in Focus

Looking ahead, American inflation data could drive sharp movement upon its release tomorrow afternoon. With core inflation due to 3.7% in February’s year-on-year figure, cooling core inflation could serve to boost Fed rate cut bets. However, with headline inflation due to hold at 3.1%, sticky CPI could see markets resizing their rate cut bets expectations.

Germany’s latest inflation figures are also due out on Tuesday. Economists expect inflation to have warmed by 0.4% last month, compared to 0.2% in January. This could serve to cap surmounting ECB rate cut bets amid signs of newly stubborn German inflation. However, with the yearly rate due to have cooled to 2.5%, down from 2.9%, longer term inflationary cooling may see EUR falter.