The EUR/USD pair closed at 1.02994, showing a relatively stable trend after a moderate bullish momentum moving away from its recent two-year trough as the dollar’s rally temporarily paused. The greenback stabilised in early Asian trading after soft U.S. producer price data pulled Treasury yields off their highs, providing some relief to other major currencies.
While the euro’s recovery reflects broader caution among traders ahead of critical U.S. inflation data, the currency remains vulnerable to dollar strength as markets weigh the Federal Reserve’s policy trajectory.
Markets are forecasting a 0.2% increase in core U.S. consumer prices for December. A higher-than-expected reading could reinforce expectations of prolonged higher interest rates, potentially reigniting dollar strength and pressuring the euro lower.
However, last week’s blowout U.S. jobs report already tempered hopes for Fed rate cuts, keeping EUR/USD movements sensitive to inflation surprises.
Picture: EUR/USD consolidates near 1.0300 with waning bullish momentum, as seen on the VT Markets app.
The charts show the EUR/USD pair treading water at 1.02994 after brushing a peak of 1.03084, reflecting a consolidation phase near the upper range of its recent trend. Short-term moving averages hold above the 30-period average, suggesting lingering bullish pressure, though the flattening lines hint at momentum running out of steam.
The outlook for the euro remains up for debate. While the Fibre has seen a bit of short-term relief with the dollar cooling off, its long-term direction will be shaped by inflation trends and the policies of central banks.
The Fibre is likely to remain range-bound until more clarity emerges from inflation data in the U.S. and UK. The upcoming U.S. fiscal policies under President-elect Donald Trump are expected to be a key driver for EUR/USD dynamics, given the potential for tariffs and inflationary pressures to bolster the dollar further.
If U.S. inflation data meets or falls short of expectations, the euro could extend gains as traders reassess the dollar’s strength.
On the other hand, a higher-than-expected inflation print or hawkish rhetoric from Federal Reserve officials could reignite the dollar rally.
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