During the midweek, EURUSD descended towards the pivotal 1.08000 threshold but adeptly clung above it. Subsequently, the pair recouped the majority of its setbacks following the revelation of a U.S. GDP report, slightly weaker than anticipated.
Potential ramifications for traders EURUSD has lately displayed heightened volatility. Observers in the market attribute this surge in volatility to month-end portfolio rebalancing and the prospect of traders strategically hedging in anticipation of crucial U.S. inflation data set to be unveiled later today. From a fundamental perspective, a hawkish sentiment pervades within the Federal Reserve (Fed). Just yesterday, John Williams, President of the New York Fed, asserted that U.S. inflation has not yet attained the 2% inflation target, indicating premature discourse on rate cuts.
Joachim Nagel, President of the Bundesbank and a member of the European Central Bank (ECB) Governing Council, articulated that the ECB demands more substantiation that price developments are completely regulated, intimating that deliberating rate cuts is untimely. On a broader scale, both the Fed and the ECB align in their stance on the interest rate trajectory, envisioning the timeline for future rate cuts nearly identical. Consequently, there exists no distinct disparity in monetary policies between these central banks, elucidating the lateral movement of EURUSD since the onset of 2024. The established range now spans 1.07000–1.09000, with only forthcoming macroeconomic statistics holding the potential to deliver a compelling impulse to escape this range.
EURUSD sustained minimal fluctuations in the Asian and early European trading sessions. Today, the pair might undergo higher-than-usual volatility due to the unveiling of two pivotal macroeconomic reports: German inflation data at 1:00 p.m. UTC and the U.S. Personal Consumption Expenditure (PCE) Price Index at 1:30 p.m. UTC. Of the two, the U.S. data carries greater significance for the market, implying that EURUSD may remain relatively stable until the report emerges. Theoretically, inflation figures surpassing expectations could positively influence the euro. Therefore, if German inflation surpasses predictions while U.S. PCE data falls below expectations, EURUSD could rally, potentially reaching 1.09000. Otherwise, the bearish trend might rekindle.