Euro Holds Firm as US Inflation Data Dampen Rate Hike Expectations
The euro held above $1.1500 against the US dollar on Wednesday as softer-than-expected US inflation data reduced expectations for aggressive Federal Reserve interest rate hikes.
The Consumer Price Index (CPI) report showed a smaller-than-anticipated increase in headline inflation, which rose 0.3% month-over-month and came in at 8.2% annually. The lower-than-forecast numbers prompted traders to scale back bets on a 75-basis-point rate hike at the Fed's next meeting.
This shift in sentiment weakened the dollar, providing support for the euro. From a technical perspective, the euro's ability to sustain gains above $1.1500 is seen as a positive short-term signal. The pair has been trading in a range between $1.1450 and $1.1550 over the past few sessions.
The European Central Bank's policy trajectory is also being closely watched, with further rate hikes expected but at a slower pace than previously anticipated. This divergence in policy expectations between the Fed and the ECB is a key driver for the pair.