EUR/USD is experiencing losses on Tuesday, despite the recent benign inflation data from the United States, suggesting that the Federal Reserve may indeed lower interest rates as anticipated by the financial markets. Currently, the pair is trading at 1.1642, reflecting a decline of more than 0.20%.
The EUR/USD pair experiences a decline as robust US labor statistics counterbalance easing inflation, postponing expectations for immediate Federal Reserve easing. Markets reduce expectations for a Fed rate cut, even with CPI falling short, pointing to robust employment figures and consistent economic momentum. Focus is directed towards Eurozone officials and the US PPI, Retail Sales for more definitive policy indications.
> The Euro experiences a decline even with mild inflation figures from the US, as strong employment data and statements from the Federal Reserve strengthen the Dollar: The Greenback regained some strength following the December Consumer Price Index in the US, which was largely in line with expectations, as core inflation dipped a tenth lower on the yearly measurement. This could support the case for rate cuts by the Federal Reserve; however, last Friday’s strong Nonfarm Payrolls report, the slight decrease in the Unemployment Rate, and a favorable ADP Employment Change 4-week average report suggest a robust labor market. In the previous year, the Federal Reserve implemented three rate cuts due to weaknesses in the labor market, despite the persistence of high inflation. The labor market continues to demonstrate strength, and prices, although nearer to 3% than 2%, have shown stability. The money market has reduced the likelihood of a 25-basis point rate cut by the Fed, as indicated by the Interest Rate Probability tool. Market participants anticipate the Fed funds rate concluding at 3.23%, suggesting a reduction of 52 basis points. Following the release of the US CPI report, former President Donald Trump criticized Fed Chair Jerome Powell again. He shared on his Truth Social Network, “Inflation numbers for the USA.” That indicates that Jerome “Too Late” Powell ought to reduce interest rates, SIGNIFICANTLY!!! If he doesn’t, he will simply remain, “TOO LATE!” Additionally, OUT, with impressive growth figures. Thank you, Mister Tariff! President DJT. Earlier, the President of the St. Louis Fed, Alberto Musalem, expressed a neutral hawkish stance, indicating that the economy is expected to grow at or above its potential in 2026. On Wednesday, the Eurozone economic calendar will include a speech from European Central Bank Vice-President Luis De Guindos. In the United States, market participants will concentrate on the upcoming releases of the Producer Price Index for October and November, Retail Sales data for November, along with a series of statements from Federal Reserve officials.
Latest FX Rate Trends: Euro declines following subdued US inflation report
- The US Consumer Price Index was reported to be largely in line with expectations. Headline CPI remained stable at 0.3% MoM, aligning with November’s rate, while annual inflation persisted at 2.7%, precisely as anticipated. Core CPI demonstrated indications of slight moderation, decreasing to 0.2% MoM from 0.3%, aligning with expectations. On a yearly basis, core inflation remained at 2.6%, unchanged from November, yet slightly below market estimates, indicating a trend towards gradual disinflation.
- In the meantime, the jobs market data remained robust. ADP’s Employment Change four-week average increased from 11K to 11.75K, indicating a slight stabilization in private-sector hiring momentum.
- In October, New Home Sales experienced a slight decline of 0.1% month-over-month, decreasing from 738K to 737K. However, data from the U.S. Department of Commerce indicated a significant annual increase, implying that the recent easing of mortgage rates and declining home prices are starting to bolster the housing market.