EURUSD trapped in a narrow range around 1.0400.
During Tuesday’s European session, the EURUSD pair settles within a narrow range around 1.0400. The pair’s price activity has been muted by the low trading volume brought on by the holidays in the Forex markets on Wednesday and Thursday, which are Boxing Day and Christmas Day, respectively.
ECB Lagarde, she is optimistic that inflation will return to the bank’s target of 2% in a sustainable manner sooner than anticipated.
The main currency pair’s outlook is generally pessimistic. The Euro (EUR) had a small decline. On Monday, following an interview with the Financial Times (FT), European Central Bank (ECB) President Christine Lagarde stated that the central bank is “very close” to announcing that inflation has been brought stably down to its medium-term target of 2%.
Christine Lagarde did, however, caution that the central bank should continue to monitor inflation in the services industry. Service inflation is still high at 3.9%, even if headline Eurozone inflation has decreased to 2.2%.
“Retaliation was a bad approach because I think that overall trade restrictions followed by retaliation and this tit-for-tat, conflictual way of dealing with trade is just bad for the EU,” Lagarde said when asked how she thought the EU should respond to incoming tariffs from US President-elect Donald Trump. the entire world economy.
Strong forecasts that Eurozone inflation will return to the bank’s objective of 2% keep ECB dovish bets for 2025 intact. In each of the upcoming four policy sessions, traders anticipate that the ECB will lower its Deposit Facility rate by 25 basis points (bps).
Daily Market Update: EURUSD follows the US dollar’s sideways trend.
During European trading hours, EURUSD remains sideways, following the US Dollar’s (USD) footsteps. Amidst little trading volume, the US Dollar Index (DXY), which measures the value of the US dollar relative to six major currencies, fluctuates in a narrow range above the crucial support level of 108.00. With the Federal Reserve (Fed) guiding fewer interest rate reduction for 2025, the USD’s overall outlook is still solid. The Fed signaled only two interest rate reduction in 2025, as opposed to the four cuts anticipated in September, according to the most recent dot plot. UBS analysts predict that the Fed will decrease interest rates by 25 basis points twice at its policy meetings in June and September.
According to recent Fed officials’ commentary, the Fed has adopted a more measured approach to interest rate cuts as a result of persistent inflation, better-than-expected labor market conditions, and uncertainty about the effects of President-elect Donald Trump’s incoming policies on the economy.
Investors will be watching Thursday’s release of the US Initial Jobless Claims data for the week ending December 20. A weak US economic calendar means that investors will pay Pay special attention to the information. Compared to the previous release of 220K, economists believe that 218K people filed for unemployment benefits for the first time.
