Anna 
On Wednesday, the EUR/USD currency pair remained relatively unchanged, trading in the 1.0850s, as traders adopted a cautious stance awaiting the release of crucial macroeconomic data from the United States. The focus is primarily on the Consumer Price Index (CPI) for March, slated for release at the onset of the US trading session.
Traders are poised for a potential breakout in EUR/USD following the CPI data release, anticipating heightened volatility should the figures deviate significantly from market expectations.
Economists have projected the US CPI data to reveal a 3.4% Year-over-Year increase in March, with core goods, excluding volatile food and energy prices, expected to rise by 3.7% YoY. Such outcomes, even if in line with expectations, would signify an inflation rate substantially above the Federal Reserve’s target of 2.0%. A notable deviation from these estimates would be necessary to prompt the Federal Reserve to consider adjusting interest rates from their current level of 5.5%.
Conversely, the European Central Bank (ECB) is perceived as more inclined towards earlier interest rate cuts amidst comparatively subdued growth and inflation outlooks within the Eurozone.
The interest rate differentials between the US and the Eurozone are regarded as a bearish factor for EUR/USD. The maintenance of higher interest rates in the US tends to attract foreign capital inflows, bolstering the US Dollar’s appeal relative to the Euro.
Further volatility in EUR/USD could materialize on Thursday following the ECB’s April policy meeting. While certain ECB members, including François Villeroy de Galhau, President of the Banque de France, have hinted at a potential interest rate cut in April, the majority of policymakers believe it might be premature, citing the absence of the latest wage data, which is deemed crucial in their inflation assessments.
Nevertheless, market participants will closely scrutinize the ECB’s accompanying statement for indications of a heightened likelihood of an interest rate cut in June, which could influence the trajectory of EUR/USD in the near term.
