Ella 
On Wednesday, EUR/USD fell modestly to around 1.0765 after rebounding from multi-week lows near 1.0720. The U.S. dollar index is weak, sitting below the 105.00 mark, providing some support for EUR/USD. However, weak German inflation data on Tuesday stoked speculation that the European Central Bank would cut interest rates, putting pressure on the euro. Investors are awaiting March inflation data from the Eurozone and the US ISM services PMI to inject new impetus into the market.
Dovish speeches from many Federal Reserve officials weighed on the dollar. Cleveland Fed President Loretta Mester said on Tuesday she expected to cut interest rates this year but ruled out holding the next policy meeting in May. Meanwhile, San Francisco Fed President Mary Daly said she believed three interest rate cuts in 2024 seemed “reasonable” but needed more convincing evidence to confirm this. Futures traders expect the U.S. Federal Reserve to begin easing policy at its June meeting and cut interest rates three times by 25 basis points each before the end of the year.
German statistics office Destatis released a report on Tuesday saying that German inflation slowed slightly more than expected in March, reaching its lowest level in nearly three years. The preliminary value of Germany’s harmonized consumer price index rose 0.6% on a monthly basis in March, slightly below expectations of 0.7%. The initial annualized rate of Germany’s Harmonized Consumer Price Index was 2.3%, lower than the expected 2.4%. The softening in inflation suggests Germany is getting closer to the European Central Bank’s (ECB) 2% target, raising hopes that the ECB will cut interest rates. This in turn weighs on the euro, creating headwinds for the EUR/USD currency pair.
