The EUR/USD pair bounced back to 1.0830 following a weaker-than-expected US Inflation report. This has raised expectations of a Fed rate cut in the upcoming September meeting. On the other hand, ECB policymakers have refrained from outlining a specific interest rate trajectory.
The softer US CPI data pushed the US Dollar lower, with the US Dollar Index dropping to around 104.50 and 10-year US Treasury yields falling below 4.30%. Investors are eagerly awaiting the Fed’s interest rate decision, with expectations leaning towards a rate cut in September after the release of the inflation data. This comes after traders had previously reduced their rate-cut bets following strong job demand and wage growth in the May US Nonfarm Payrolls report.
In the European market, the EUR/USD pair climbed above 1.0800 as the US Dollar weakened due to the soft inflation report. However, the Euro remains vulnerable amidst uncertainty surrounding the French elections. Additionally, the ECB’s interest rate path is uncertain as policymakers are cautious about committing to a specific rate-cut trajectory.
Technical analysis shows that the EUR/USD pair has risen above a triangle formation, indicating a positive outlook. The pair has also rebounded above the 200-day Exponential Moving Average, further supporting a bullish sentiment. The 14-period Relative Strength Index is expected to remain steady around 40.00.
Overall, market movements indicate a strengthening Euro against a weakening US Dollar, with potential rate cuts by the Fed in September and ongoing uncertainties in the European market.