Ella 
EUR/USD rose slightly to around 1.0860 in early Asian trading on Tuesday. A lower US dollar has provided some support for EUR/USD. Tuesday will see the release of the U.S. NFIB Business Optimism Index and the RCM/TIPP Economic Optimism Index, as well as a speech by Minneapolis Fed Fed Kashkari.
Improved U.S. labor market data and the continued strong performance of the U.S. economy have increased uncertainty about the Federal Reserve cutting interest rates this year. Minneapolis Fed President Neel Kashkari said last week that the Fed is expected to cut interest rates twice this year, but that no rate cuts would be a possibility if inflation continues to stagnate. Financial markets are pricing in the probability of a rate cut in both June and July below 50%, down from levels in early April, the CME FedWatch tool showed.
After U.S. inflation recorded a higher-than-expected annual rate of 3.2% in February, focus this week will turn to U.S. consumer price index (CPI) data for March due on Wednesday. Stronger-than-expected inflation in March could dampen expectations of a rate cut in June, while lower inflation could fuel rate cut speculation.
In the Eurozone, the European Central Bank’s interest rate decision on Thursday will be the focus. The European Central Bank is widely expected to keep interest rates unchanged at its April policy meeting. Data released last week showed inflation unexpectedly fell in March, raising expectations the European Central Bank will cut interest rates. Investors will also be looking for any clues on the pace of the ECB’s interest rate policy once the easing cycle begins. Derivatives price moves collected by LSEG showed markets see a more than 90% chance of the European Central Bank cutting interest rates in June.
