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EUR/USD holds positive ground above the mid-1.0900s amid the USD weakness.
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European Central Bank (ECB) officials emphasized the need to wait for more data before making decisions on rate normalization.
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The US Producer Price Index (PPI) unexpectedly dropped in December.
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Investors will focus on Eurozone Industrial Production, due later on Monday.
The EUR/USD pair posts modest gains during the early Asian session on Monday. The softer US Dollar (USD) and risk-on environment lend some support to the major pair. Due to the lack of top-tier US economic data from the US due to the Martin Luther King Jr. holiday, risk sentiment is anticipated to remain the primary driver of the major pair price movement. EUR/USD currently trades near 1.0953, up 0.03% on the day.
European Central Bank (ECB) officials have stressed the need to wait for additional economic data before deciding on rate normalization. On Saturday, ECB Chief Economist Philip Lane said the central bank will have key information by June to decide on a possible series of interest rate cuts, but leaving early could be self-defeating. Last week, ECB President Christine Lagarde said that the ‘toughest and worst bits’ of inflation were probably over, and that interest rates would be cut if the ECB was confident that inflation had fallen below 2%.
Across the pond, the US producer price index (PPI) unexpectedly fell in December, triggering the prospect that the Federal Reserve (Fed) will start cutting interest rates this year. According to data released Friday by the Bureau of Labor Statistics, the PPI rose 1.0% annually in December from November’s 0.8% reading, while the core PPI was flat for the month, with annual growth falling to 1.8% from 2.0%. With signs of cooling inflation, investors are expecting additional monetary easing through 2024 Markets are betting on 160 basis points (bps) of rate cuts from the Fed this year
Traders will take more cues from ECB speakers this week, including Villeroy (Tuesday) and Nagel (Wednesday). Also, the ECB President Lagarde is set to speak on Wednesday, Thursday, and Friday. Apart from this, ECB Minutes will be released on Thursday.
EUR/USD
