EUR/USD plunged over a full percentage point to the upper 1.0700s after Wednesday’s release of hotter-than-expected US Consumer Price Index (CPI) data. March inflation figures lowered the likelihood of an early Federal Reserve (Fed) interest rate cut.
US Dollar Gains on Higher Rate Expectations
The strong inflation data boosts the US Dollar (USD) as higher interest rates attract foreign capital inflows. This dynamic creates downward pressure on EUR/USD, which reflects the relative value of the Euro against the US Dollar.
ECB Outlook: Rate Cuts Loom
The European Central Bank (ECB) is viewed as more likely to cut interest rates sooner than the Fed due to weaker Eurozone growth and inflation expectations. This divergence in central bank outlooks is a bearish factor for EUR/USD.
ECB April Meeting: Potential for Volatility
Thursday’s ECB policy meeting could trigger further EUR/USD volatility. While some ECB members have signaled potential April rate cuts, the majority view is that such action is premature given the lack of up-to-date wage data, a key inflation input. However, any shift in the ECB statement towards a higher probability of June cuts could move EUR/USD.
Technical Analysis: Breaks Key Support, Eyes Further Downside
EUR/USD fell decisively below support provided by the 50-day and 200-day Simple Moving Averages (SMAs) . The pair is now targeting further downside toward the April 2nd swing low support around 1.0725.
