- EUR/USD rises ahead of the US CPI data for January, which could impact the Federal Reserve’s monetary policy outlook.
- European Commission President Ursula von der Leyen warns of potential countermeasures against US President Trump’s 25% tariffs on steel and aluminum imports.
- The European Central Bank (ECB) is anticipated to implement three more interest rate cuts this year.
EUR/USD climbs near 1.0380 in Wednesday’s European session as investors await the US Consumer Price Index (CPI) data for January, scheduled for release at 13:30 GMT.
The CPI report is expected to show core inflation—excluding food and energy—rising 3.1% annually, slightly lower than December’s 3.2%. Meanwhile, headline inflation is projected to hold steady at 2.9%, with both monthly core and headline CPI increasing by 0.3%.
The data will play a crucial role in shaping market expectations regarding the Federal Reserve’s (Fed) monetary policy stance. A slowdown in inflation could strengthen bets on rate cuts, while persistently high inflation may reinforce the Fed’s decision to maintain elevated interest rates. Currently, the CME FedWatch tool suggests the Fed is unlikely to cut rates in March or May, with a 50% chance of easing in June.
During his testimony on Tuesday, Fed Chair Jerome Powell reiterated that the central bank is in “no rush to cut interest rates,” citing strong economic conditions, a resilient labor market, and inflation still above the 2% target. Powell warned that premature easing could hinder inflation progress.
Later this week, investors will also monitor the US Producer Price Index (PPI) and Retail Sales data, set for release on Thursday and Friday, respectively.
Market Movers: EUR/USD Holds Firm Despite Rising US-EU Trade Tensions
- The Euro remains resilient despite escalating concerns over a potential trade war between the US and the Eurozone. European Commission President Ursula von der Leyen warned that the EU will not ignore President Donald Trump’s newly imposed 25% tariffs on steel and aluminum imports and is prepared to introduce proportionate countermeasures.
- Trump’s executive order aims to boost domestic production, with additional reciprocal tariffs likely on nations engaging in perceived unfair trade practices.
- The Eurozone faces risks from potential retaliatory measures, particularly in the automotive sector, where the EU imposes a 10% tariff on US car imports while US imports from the bloc face just a 2.5% duty.
- On the monetary policy front, markets anticipate three additional rate cuts from the European Central Bank (ECB) this year, following the central bank’s 25-basis-point cut in January.
- Investors now look ahead to the European Commission’s economic growth forecasts, set for release on Thursday.
Technical Analysis: EUR/USD Holds Key Support at 1.0300
EUR/USD remains firm near 1.0380, recovering from the critical 1.0300 support level. However, the pair faces resistance at the 50-day Exponential Moving Average (EMA) around 1.0423, limiting bullish momentum.
The 14-day Relative Strength Index (RSI) hovers within the 40.00-60.00 range, signaling a neutral market trend.
On the downside, the January 13 low of 1.0177 and the psychological support at 1.0100 serve as key floors. Conversely, the 1.0500 mark represents a significant resistance level for Euro bulls.
