Ella 
In Asia on Wednesday, EUR/USD expanded its losses for the second consecutive trading day, trading around 1.0750. The U.S. dollar (USD) rose on expectations that the Federal Reserve (Fed) will keep interest rates high for longer. However, weak U.S. labor data last week reignited expectations that the Federal Reserve may cut interest rates in 2024.
On Tuesday, hawkish comments from Minneapolis Fed President Neel Kashkari boosted the dollar, weighing on EUR/USD. Kashkari said the most likely scenario is that interest rates remain unchanged for an extended period. However, if deflation returns or the job market weakens significantly, a rate cut may be considered. According to Reuters, although a rate hike is not the most likely outcome, it cannot be completely ruled out.
On Monday, Bloomberg reported that Richmond Fed President Thomas Barkin said raising interest rates could limit U.S. economic growth. However, Barkin pointed out that raising interest rates will help curb inflationary pressures and bring it closer to the central bank’s 2% target.
Eurozone retail sales (monthly rate) surged 0.8% in March, rebounding from an upwardly revised -0.3% reading in February. The indicator beat expectations by 0.6% and recorded the largest increase in retail activity since September 2022, pointing to the strength of Europe’s consumer sector. Elsewhere, retail sales (annual rate) rose 0.7%, compared with a revised -0.5% reading in February. This showed retail growth for the first time since September 2022, signaling a positive shift in consumer spending trends.
The ECB is expected to start lowering borrowing costs in June. According to the “Business Standard” report, the European Central Bank’s chief economist Philip Lane said that recent economic data strengthened his belief that inflation is gradually approaching the 2% target. Although many ECB officials appear to support easing measures next month, ECB President Christine Lagarde has not yet proposed an interest rate cut.
