09 Dec 2024

EUR/USD has weakened to approximately 1.0550 during the Asian session on Monday.

Market participants are speculating about a possible rate reduction by the Federal Reserve in December.

Additionally, the European Central Bank is expected to implement another 25 basis point cut at its meeting on Thursday in December.

The EUR/USD currency pair is exhibiting a slight negative trend, trading around 1.0550 during the Asian session on Monday. Market participants are keenly awaiting the release of the US Consumer Price Index (CPI) inflation report for November, scheduled for Wednesday. Following this, the European Central Bank (ECB) will announce its interest rate decision on Thursday, which is anticipated to provide insights into future monetary policy directions.

Last week, the likelihood of a quarter-point rate reduction by the Federal Reserve (Fed) on December 18 increased after the employment report indicated robust job growth, albeit not at a level that would dissuade Fed officials from considering a reduction in rates to a range of 4.25% to 4.5%, down from the current 4.5% to 4.75%.

With expectations rising for a US interest rate cut later this month, the inflation data released on Wednesday may represent the final hurdle to a third consecutive rate reduction by the Fed. The annual consumer price inflation is projected to increase to 2.7% year-on-year in November, up from 2.6% in October. Meanwhile, core inflation, which excludes the more volatile food and energy sectors, is anticipated to remain stable at 3.3% year-on-year for November.

On Thursday, the European Central Bank (ECB) is expected to implement its fourth interest rate cut of the year during its last policy meeting of 2024. Analysts predict that the ECB will maintain its data-driven approach, emphasizing that it is "not pre-committing to a specific rate trajectory." However, the press conference led by ECB President Lagarde may provide valuable insights regarding the future interest rate landscape. Any dovish comments from ECB officials could exert downward pressure on the Euro (EUR) relative to the US Dollar.