Euro fell in European trade on Wednesday against a basket of major rivals, resuming losses against the dollar and almost hitting seven-week lows on track for monthly losses due to mounting concerns about the widening US-Euro zone policy gap.
The European Central Bank is now widely expected to cut interest rates next April, with investors now awaiting important inflation data later today for January, important to gauge the likely path ahead for policies.
EUR/USD
EUR/USD fell 0.3% to 1.0815, with a session-high at 1.0848, after rising 0.15% on Tuesday against the dollar following strong European growth data for the fourth quarter of last year, while rebounding from a seven-week trough at 1.07956.
Inflation Data
Later today, consumer prices data for January will be released for Germany and other major European economies, with total euro zone data releasing tomorrow.
European Rates
Following the latest ECB meeting and Christine Lagarde's remarks, the odds for an April ECB interest rate cut surged to 80%.
Lagarde said that an interest rate cut in the summer is possible while opening the door as well for an April cut.
Monthly Trades
EUR/USD is down 2% so far this month, on track for the first monthly loss in three months, and the heftiest since September.
Interest Rate Gap
The current US-Euro zone interest rate gap stands at 100 basis points, the lowest since May 2022, and was expected to shrink to 75 basis points in March, however as the odds of an early US interest rate cut faded, the gap could actually widen to 125 basis points.
US Rates
Recent US data and bullish remarks by Fed officials hurt the odds of early interest rate cuts in March as markets expected a 0.25% interest rate in May.
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