Euro pressure as ECB officials hint at rate cut in June

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The EURUSD pair maintained its position around 1.0770 on Friday, extending losses for the fourth consecutive day. However, trading volumes were light as market participants were likely observing Good Friday.

The Euro faces downward pressure as European Central Bank (officials are increasingly suggesting a probable interest rate cut in June.

Additionally, the Euro faced downward pressure following weaker-than-expected retail sales data from Germany.

The monthly report revealed a 1.9% decline in the sales of the German retail sector in February, contrary to expectations of a 0.3% increase following a previous decline of 0.4%. Additionally, year-over-year retail sales fell by 2.7%, surpassing the anticipated decline of 0.8% and the previous decrease of 1.4%.

Yannis Stoumaras said earlier that there is a growing consensus within the ECB for a rate reduction in June.

ECB policymaker Francois Villeroy observed a rapid decrease in core inflation, although it remains elevated. He indicated that achieving the ECB’s inflation target of 2% is feasible, but cautioned against growing downside risks if the ECB opts not to reduce rates.

Additionally, ECB executive board member Fabio Panetta has emphasised that restrictive policies are dampening demand and causing a rapid decline in inflation.

DXY strengthens

Meanwhile, the US Dollar Index (DXY) continues to strengthen, nearing 104.60, as recent data indicates annualised economic expansion in the United States, driven by consumer spending.

In the fourth quarter of 2023, annualised US gross domestic product (GDP) expanded by 3.4%, surpassing market expectations of remaining unchanged at a 3.2% increase.

US Core Personal Consumption Expenditures (QoQ) for the same period came in at 2.0%, slightly below the expected and previous reading of 2.1%.

The hawkish statements from a Federal Reserve official, reinforced the Greenback.

Fed Governor Christopher Waller’s comments on Wednesday hinted at a potential delay in interest rate cuts, given the strong inflation figures.

Investors now await the US Personal Consumption Expenditures (PCE) report on Friday, which serves as the Fed’s preferred inflation gauge, to gain additional insight and guidance.

(Source: OANDA)