Euro awaits US data, ECB speakers
The EURUSD exchange rate was trading in the mid 1.0900s after reaching a peak at 1.0981 the previous week. Upcoming data releases and events are expected to introduce some volatility to the Euro-dollar pair. In the US, upcoming factory gate inflation and Retail Sales data could influence expectations regarding the Federal Reserve’s timeline for interest rate cuts, which is a significant factor for the US Dollar. Economists anticipate a decrease in Core PPI to 1.9% year-over-year in February from 2.0% in January, with a month-on-month forecast showing a 0.2% increase compared to the 0.5% increase the previous month. The headline Producer Price Index (PPI) is expected to show a 1.1% year-over-year gain, up from 0.9% in January, and a 0.3% month-on-month gain, consistent with the previous month. This data is a crucial indicator for CPI inflation, as increases in wholesale costs are typically passed on to consumers. Market participants are betting on a 67.2% probability of the Fed cutting interest rates in June, according to the CME FedWatch Tool. US Treasury Secretary Janet Yellen stated that it seems unlikely for interest rates to return to pre-COVID-19 levels and deemed the interest rate projections in President Biden’s budget plan as “reasonable.” In Europe, several ECB officials are set to speak, potentially providing insights into whether interest rates will be cut in April or June. If inflation remains high, interest rates are likely to stay elevated, supporting the Euro. ECB Governing Council member Francois Villeroy de Galhau indicated a preference for an April rate cut, while Bank of Austria Governor Robert Holzmann and ECB President Christine Lagarde suggested a June timeline for revisiting rate policies. The timing of ECB rate cuts could impact the Euro and EURUSD exchange rate. After recent US inflation data, a calmer period is expected in the EURUSD pair ahead of the next week’s Federal Reserve meeting.
