The EUR/USD pair has seen an increase in support after the release of lower CPI and Retail Sales data in the US on Wednesday. This has led to a decline in the US Dollar, with the Euro gaining momentum due to expectations of a convergence in monetary policy between the Eurozone and the US.
The EUR/USD pair has continued its winning streak for the fourth session, trading around 1.0880 during the Asian hours on Thursday. The US Dollar’s decline is contributing to pressure on the pair, as improved risk appetite plays a role in the market dynamics.
The lower-than-expected monthly CPI and Retail Sales data in the US have supported the likelihood of multiple rate cuts by the Federal Reserve in 2024. The US CPI decelerated to 0.3% month-over-month in April, below the expected 0.4% reading. Additionally, Retail Sales fell short of expectations, leading to a weaker US Dollar overall.
The US Dollar Index (DXY) is currently hovering around 104.20, with the decline in US Treasury yields weakening the Greenback. The 2-year and 10-year yields on US Treasury bonds stand at 4.71% and 4.32%, respectively, adding to the pressure on the US Dollar.
On the Euro side, the seasonally adjusted GDP for the Eurozone expanded by 0.3% quarter-on-quarter in the first quarter, meeting expectations and signaling a recovery from previous contractions. The annual growth rate also matched expectations at 0.4%, providing further support for the Euro.
Expectations for a convergence in monetary policy between the Eurozone and the US are growing, with the ECB expected to lower rates in its upcoming meeting in June. Market expectations are also rising for the Fed to begin interest rate cuts from September, especially after a slowdown in core inflation in April. Overall, the EUR/USD pair is set to see continued movements as market dynamics and economic data continue to play a role in shaping its direction.
