Speculation on euro rate cuts | 03 Abril 2024

03 Abril 2024, EUR/USD

Speculation on euro rate cuts

Events to watch out for today:

17:00 EET. USD - ISM Services Business Activity Index

19:10 EET. USD - Federal Reserve Chairman Jerome Powell to deliver speech

EURUSD:

EURUSD is holding on to small losses near 1.0775. The weakening of the US Dollar Index (DXY) below 105.00 has provided some support to the major pair. However, weaker German inflation data on Tuesday put pressure on the euro as it sparked speculation of a rate cut by the European Central Bank (ECB). Investors are awaiting new Eurozone inflation data for March and the US ISM Services PMI from the ISM to provide fresh impetus.

Dovish comments from many Federal Reserve (Fed) officials are putting pressure on the dollar. Cleveland Fed President Loretta Mester said Tuesday that she expects to cut rates this year but ruled out the possibility of another meeting in May. Meanwhile, San Francisco Fed President Mary Daly said she believes three rate cuts in 2024 is "reasonable," but she needs more convincing evidence to back that up. Futures traders expect the U.S. Fed to begin easing at its June meeting and cut rates by three-quarters of a percentage point by the end of the year.

German inflation fell slightly more than expected in March to the lowest in nearly three years, German statistics office Destatis said Tuesday. Germany's preliminary Harmonized Index of Consumer Prices (HICP) rose 0.6% in March from the previous month, slightly below forecasts for a 0.7% rise from the previous month. On a year-over-year basis, HICP rose 2.3%, below the market consensus forecast of 2.4%. The lower inflation rate indicates that Germany is getting closer to the European Central Bank's (ECB) 2% target, raising market hopes for an interest rate cut soon. This in turn puts pressure on the Euro (EUR) and creates a headwind for the EUR/USD pair.

Trading recommendation: Trade with buy orders when the price reaches 1.0800. Sell at the price level of 1.0750.

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David Johnson
Analyst of «FreshForex» company
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