Implications of US Inflation Data on EUR/USD Pair

Implications of US Inflation Data on EUR/USD Pair

The EUR/USD pair is facing pressure around 1.0740 as the USD strengthens on Thursday. The unexpected rise in US CPI inflation data for March has pushed the US Dollar to yearly highs, leading to a defensive stance for the major pair in the early Asian session.

The European Central Bank (ECB) is widely expected to maintain interest rates unchanged at its April meeting. However, ECB President Christine Lagarde is likely to address inflation data and the potential for a rate cut in June. The divergence in interest rates between the Fed and ECB could result in selling pressure on the Euro and act as a headwind for the EUR/USD pair.

The unexpected increase in US inflation data in March has fueled speculation that the Federal Reserve may postpone interest rate cuts. The US Consumer Price Index (CPI) rose 0.4% MoM, exceeding the estimated 0.3% gain. On an annual basis, the CPI grew by 3.5% YoY compared to the expected 3.4% rise.

Excluding volatile food and energy prices, the Core CPI witnessed a 0.4% increase in March, surpassing the market consensus of 0.3%. Additionally, the Core figure showed a growth of 3.8%, higher than the anticipated 3.7% rise.

Investors will be monitoring the release of the US Producer Price Index for March and weekly Initial Jobless Claims on Thursday. Furthermore, speeches by Fed’s Williams, Collins, and Bostic are scheduled, adding to market volatility and sentiment.

The sharper than expected rise in US inflation data has led to a bullish sentiment for the US Dollar, impacting the EUR/USD pair. As central banks navigate through economic challenges, market participants will continue to scrutinize monetary policies and data releases to gauge the direction of major currency pairs like EUR/USD.

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