Anna 
The euro (EUR) exhibited slight fluctuations on Monday, edging towards 1.07100 after trading within a narrow range. Traders are now eyeing key data releases from the eurozone, including the Harmonized Index of Consumer Prices (HICP) inflation report for April, scheduled for release at 9:00 a.m. UTC today.
Germany’s Consumer Price Index (CPI) inflation for April showed a month-on-month increase of 0.5%, slightly higher than March’s 0.4% but slightly below the forecasted 0.6%. Meanwhile, Germany’s HICP inflation rose to 2.4% year-on-year, surpassing expectations of 2.3%. These figures provide insights into inflation trends within the euro area.
Market sentiment remains cautious ahead of the Federal Reserve (Fed) monetary policy meeting on Wednesday. Investors widely anticipate that the Fed will maintain US interest rates this week, but they are eager for clues regarding potential rate adjustments later in the year. The CME’s FedWatch Tool indicates a 57.9% probability of the first rate cut occurring in September.
Amid expectations of a more hawkish stance from the Fed, the US dollar (USD) has gained strength, impacting the EUR/USD exchange rate. Currently, the market anticipates a total of 67 basis points in interest rate cuts from the European Central Bank (ECB) in contrast to only 35 basis points expected from the Fed throughout 2024. This divergence in monetary policy outlooks has exerted downward pressure on EUR/USD.
EUR/USD has trended lower during Asian and early European trading sessions today. Traders should closely monitor upcoming eurozone data releases, particularly Germany’s Gross Domestic Product (GDP) report at 8:00 a.m. UTC and eurozone GDP and Consumer Price Index (CPI) data at 9:00 a.m. UTC. Stronger-than-expected data could propel EUR/USD towards 1.07600, while disappointing figures may drive the pair further downwards towards 1.06600, reflecting continued bearish sentiment.
