- EUR/USD rebounds on Tuesday after registering losses in the previous sessions.
- CME FedWatch Tool suggests a 55.2% probability of a 25 bps rate cut for June.
- The market expects German inflation to be unchanged in February.
EUR/USD has bounced back following two consecutive days of losses, making gains and approaching the 1.0930 mark during Tuesday’s Asian session. However, the pair encountered resistance amid a risk-averse atmosphere ahead of the release of the Consumer Price Index (CPI) data from the United States (US).
Market expectations point to an increase in the US CPI for February month-over-month, although the yearly index is predicted to remain unchanged. A robust CPI report would likely dampen prospects of an imminent rate cut by the Federal Reserve (Fed), potentially strengthening the US Dollar (USD) and presenting challenges for the EUR/USD pair.
As per the CME FedWatch Tool, there has been a slight decline in the likelihood of a 25 basis points (bps) rate reduction in March and May, with probabilities at 3.0% and 21.9%, respectively. The probability of a 25 bps rate cut has decreased to 55.2% for June.
Meanwhile, European Central Bank (ECB) President Christine Lagarde has taken a cautious approach, emphasizing the necessity for more evidence before contemplating rate adjustments. The ECB has chosen to maintain its existing monetary policy, reaffirming its dedication to guiding inflation back within its desired parameters.
The ECB has articulated its intention to uphold appropriately stringent policy measures for as long as necessary to reach its inflation objective. The optimistic outlook surrounding the ECB could offer bolstering for the Euro, thereby supporting the EUR/USD pair. Tuesday’s release of Consumer Price Index (CPI) data from Germany is likely to capture the attention of investors.
