Why Is EUR/USD Holding Above 1.0700? | Key Factors Driving the Euro-Dollar Pair

The when will pi be launchedEUR/USD currency pair continues to demonstrate strength in early Asian trading sessions, maintaining its position above the psychologically significant 1.0700 level. This performance comes as market participants digest recent inflation data and anticipate crucial economic releases from Europe.

Several fundamental factors are currently influencing the EUR/USD pair:

The US Dollar Index (DXY) remains below the 106.00 threshold, creating favorable conditions for EUR/USD
March's US PCE inflation data surprised markets with a 2.7% year-over-year increase
Diverging central bank policies between the ECB and Federal Reserve are creating interesting dynamics

Market attention now turns to Germany's preliminary CPI figures for April, scheduled for release on Monday. These numbers could provide important clues about price pressures in the Eurozone's largest economy and potentially influence the European Central Bank's policy trajectory.

The Federal Reserve's upcoming policy meeting on Wednesday represents another critical event for currency markets. While no immediate rate changes are anticipated, traders will scrutinize the central bank's language for hints about future monetary policy adjustments.

Recent inflation readings from the United States have caused significant shifts in market expectations regarding the timing of potential Fed rate cuts. The CME FedWatch Tool now indicates:

Only 25% probability of a rate cut by July (down from 50% last week)
Nearly 60% chance of a rate reduction by September

This recalibration of expectations could support the US Dollar in coming weeks, potentially limiting EUR/USD's upside potential.

Friday's PCE data revealed persistent inflationary pressures in the US economy:

Headline PCE rose 2.7% annually (versus 2.5% previously)
Core PCE held steady at 2.8% year-over-year
Monthly figures showed 0.3% increases for both headline and core measures

Across the Atlantic, ECB officials have highlighted moderating inflation in the Eurozone, suggesting the central bank might implement rate reductions before its US counterpart. ECB President Christine Lagarde has indicated that policymakers remain likely to begin lowering the deposit rate from its current 4% level in June, while maintaining flexibility regarding subsequent moves.

Technical indicators for EUR/USD show:

Current price: 1.0709
Daily change: +0.0015 (+0.14%)
Key moving averages ranging from 1.0727 (20-day) to 1.0806 (200-day)

Market participants should monitor these technical levels along with fundamental developments to assess the pair's potential direction in coming sessions.

Why Is EUR/USD Holding Above 1.0700? | Key Factors Driving the Euro-Dollar Pair

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