EUR/USD Rebounds Ahead of ECB Decision as Market Awaits US CPI Data
The EUR/USD currency pair has almost erased its losses from the previous day's sell-off ahead of the European Central Bank (ECB) decision on interest rates. The US dollar has been losing ground since the release of the nonfarm payroll (NFP) report, but the market's focus shifted to the Consumer Price Index (CPI) data. According to Wall Street Journal economist Sarah Bloom Raskin, Fed's Michael Waller mentioned that he wouldn't consider a rate hike unless they get a hot CPI.
The US PPI report is due today, but the key event ahead of the Federal Open Market Committee (FOMC) decision next week remains the US CPI release tomorrow. A soft or in-line CPI will likely weaken the dollar, while an upside surprise in core monthly inflation data could trigger another rally on a hawkish repricing.
The ECB is widely expected to hike interest rates by 25 basis points today, bringing the policy rate to 2.50%. The central bank's meeting-by-meeting approach and Lagarde's statements suggest that they won't explicitly pre-commit to another hike. Markets are pricing around 48bps of tightening by year-end and 85bps by the end of 2027.