The EUR/USD currency pair experienced a slight decline during the Asian trading session on Monday, hovering around the 1.0550 level. The prevailing market sentiment indicates that traders are anticipating a rate cut by the Federal Reserve in December, while expectations are also building for another reduction from the European Central Bank (ECB) during its upcoming meeting.
Key economic indicators are set to influence the market in the coming days. The US Consumer Price Index (CPI) for November will be released on Wednesday, and investors are keenly anticipating its implications on the Federal Reserve’s monetary policy. Following that, the ECB’s decision on interest rates will be the focal point, as investors seek insights into future monetary tightening or easing strategies.
Last week’s robust employment report in the US has led to increased speculation that the Federal Reserve might lower rates by a quarter-point on December 18. Currently, the Fed’s rates are positioned between 4.5% and 4.75%, with the expectations of a reduction to between 4.25% and 4.5%. However, continuing inflationary pressures might pose a challenge to this projection. Analysts forecast that the annual consumer inflation rate for November will rise to 2.7%, up from 2.6% the previous month, with core inflation remaining stable at 3.3%.
On the ECB front, as it approaches its final policy meeting of 2024 on Thursday, many expect the central bank to implement its fourth interest rate cut of the year. While the ECB is likely to emphasize a data-driven approach without committing to a definitive rate path, any comments from President Lagarde may provide insight into the bank’s future policy direction. Dovish statements from the ECB could exert downward pressure on the EURO against the US Dollar.
