EUR/USD faces selling pressure near 1.0800 in Friday’s American session. The major currency pair fails to hold strength as investors expect that the European Central Bank (ECB) will start lowering its borrowing rates in June.
However, ECB policymakers are divided over extending the rate-cut cycle after the June meeting. A few policymakers believe that additional interest rate cuts from the July meeting could revamp price pressures.
ECB policymaker and Bank of Greece Governor Yannis Stournaras said in an interview with a Greek media outlet last week that he sees three rate cuts this year. He sees a rate cut in July as possible and added that an economic rebound in the first quarter made a three-cuts scenario more likely than four. The Eurozone economy expanded by 0.3% in the January-March period, beating expectations of a 0.1% growth.
On the contrary, ECB Governing Council member and Governor of Austria's central bank, Robert Holzmann, said on Wednesday that he doesn't see a reason to cut key interest rates "too quickly or too strongly," Reuters reported.
This week, EUR/USD has been driven by market sentiment due to the absence of tier-1 Eurozone and United States economic data. However, next week, investors will focus on the US Consumer Price Index (CPI) data for April, which will be published on Wednesday.
EUR/USD is steadily approaching the downward-sloping border of a Symmetrical Triangle pattern formed on a daily time frame, which is plotted from December 28 high around 1.1140. The upward-sloping border of the triangle pattern is marked from the October 3 low at 1.0448. The Symmetrical Triangle formation exhibits a sharp volatility contraction.
The major currency pair has come closer to the 200-day Exponential Moving Average (EMA), which trades around 1.0780.
The 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, suggesting indecisiveness among market participants.
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed May 15, 2024 12:30
Frequency: Monthly
Consensus: 3.4%
Previous: 3.5%
Source: US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
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