EURUSD:
The Euro-dollar pair is declining after rising in the previous session, trading near 1.0300 during Asian hours on Monday. Traders are expected to keep a close eye on the HCOB composite purchasing managers’ index (PMI) for the Eurozone and preliminary consumer price index (CPI) data for Germany due later in the day.
EUR/USD faces headwinds as market analysts expect further declines, possibly to parity, due to divergent monetary policy outlooks from the Federal Reserve (Fed) and the European Central Bank (ECB).
In the Eurozone, ECB policymakers favor maintaining the current pace of monetary policy easing. Markets have already priced in a 113 basis point (bps) cut in ECB interest rates this year, implying at least four 25 bps rate cuts. This outlook reflects growing concerns that Eurozone inflation will not reach the ECB’s 2% target.
On Thursday, ECB Governing Council member and Bank of Greece Governor Yannis Stournaras said in an interview with Skai radio that the central bank’s benchmark interest rates should fall to “around 2%” by “this fall.” That suggests the ECB is likely to cut the deposit rate at each of its next four meetings.
Fed officials are also signaling a more cautious approach to rate cuts in 2025. On Friday, FRB Richmond President Thomas Barkin emphasized that the benchmark rate should remain restrictive until there is confidence that inflation will return to the 2% target. In addition, Fed Chair Adriana Kugler and San Francisco Fed President Mary Daly emphasized that U.S. central bankers will face the difficult task of reducing the pace of monetary policy easing this year.
Trading recommendation: Watch the level of 1.0300, if consolidated below consider Sell positions, if rebounded consider Buy positions.
Origin: FreshForex
