EUR/USD traders withdraw to patiently await inflation data
EUR/USD will likely not see much volatility until the release of CPI. Economists expect the data to show that prices in the US to have risen by 3.4% Year-on-Year in March (3.7% YoY for core goods), both of which are still well above the Federal Reserve’s (Fed) 2.0% target. A more substantial decline is required before the Fed will likely bring down interest rates from their current 5.5% level.
For EUR/USD, the maintenance of higher interest rates in the US compared to the Eurozone is a bearish headwind. This is because relatively higher interest rates favor foreign capital inflows.
In contrast to the Fed, the European Central Bank (ECB) is seen as more likely to cut interest rates earlier amid more subdued growth and inflation expectations.
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