Ella 
EUR/USD rebounded from a three-week low of 1.0723 recorded on Friday. During Monday’s Asian trading session, EUR/USD traded higher around 1.0760. However, the U.S. dollar (USD) gained momentum following stronger economic data from the United States.
U.S. nonfarm payroll employment increased sharply to 199,000 in November, exceeding expectations; the U.S. unemployment rate fell to 3.7% from the previous 3.9%. Meanwhile, Germany’s harmonized consumer price index (year-on-year) held steady at 2.3% in November, in line with expectations, with the monthly data showing a 0.7% decline, similar to October.
Market expectations show that the European Central Bank (ECB) will keep the main refinancing operations rate at 4.5% in its upcoming monetary policy statement on Thursday. Additionally, markets expect the European Central Bank to begin cutting interest rates in March 2024.
On the other hand, there is endless speculation surrounding the U.S. Federal Reserve’s (Federal Reserve) interest rate trajectory going forward and how long policy rates will remain restrictive. However, the market is unanimously expecting the Federal Reserve to keep interest rates at 5.5% at its upcoming monetary policy meeting on Wednesday.
The U.S. Dollar Index (DXY) remains strong above 104.00, supported by positive U.S. Treasury yields. Currently, 2-year and 10-year U.S. bond coupon yields are 4.24% and 4.73%, respectively.
Investors will be closely watching Tuesday’s U.S. Consumer Price Index (CPI) data for its potential impact on markets. Additionally, Germany will release its December ZEW Survey – Economic Sentiment Index, which will add to market focus.
