Investors seem reluctant ahead of the crucial inflation data from the Eurozone and the United States, leading to the EUR/USD pair's subdued range-bound price action on Thursday.
Retail Sales in Germany fell by 0.4% MoM in January, missing expectations for a 0.5% increase, and adding to concerns about the darkening outlook for the Eurozone's biggest economy.
ECB Governing Council member Peter Kazimir said on Wednesday that he would prefer the central bank to start cutting rates in June, followed by a smooth and steady cycle of policy easing.
ECB Vice President Luis de Guindos said that the recent inflation data has been very positive, though the central bank needs to be sure that prices will move towards the 2% target before cutting rates.
Money markets are now pricing in around 90 basis points (bps) of rate cuts by the ECB this year, down from almost 150 bps a month ago, which is seen as acting as a tailwind for the Euro.
The second estimate of the US GDP print showed on Wednesday that the world's largest economy grew by a 3.2% annualized pace during the fourth quarter vs the advance reading of a 3.3% rise.
The data suggested that the US economy remains in good shape, which, along with comments by several Federal Reserve officials, reaffirmed the higher-for-longer interest rates narrative.
New York Fed President John Williams said that the central bank will begin cutting rates this year depending on how the data comes in, albeit there is still a way to go before hitting the 2% inflation target.
Atlanta Fed President Raphael Bostic stressed that the US central bank has not declared victory over inflation yet and said that he is comfortable advising patience when it comes to loosening policy.
Furthermore, Boston Fed Bank President Susan Collins noted that it will become appropriate to begin easing policy later this year but the path to returning inflation to its 2% target will likely be bumpy.
The US Dollar, however, struggles to attract buyers as traders look to the US Personal Consumption Expenditures (PCE) Price Index for cues about the Fed's rate-cut path and some meaningful impetus.
Thursday's economic docket also features the flash CPI estimates from Germany, France and Spain, followed by US macro data – Weekly Initial Jobless Claims, the Chicago PMI and Pending Home Sales.
The focus will then shift to the Eurozone consumer inflation figures on Friday, which might influence expectations about the ECB's future policy decision and infuse volatility around the currency pair.
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