Euro Gains Traction on ECB Rate Cut Bets, US Dollar Subdued

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The EUR/USD currency pair is climbing in Monday’s European session, currently trading at 1.0780. This rise is attributed to a combination of improved market sentiment and a weaker US Dollar.

Euro Buoyed by ECB Rate Cut Expectations:

  • Financial markets are increasingly pricing in earlier and more aggressive rate cuts from the European Central Bank (ECB) compared to the Federal Reserve (Fed).
  • The ECB is anticipated to initiate rate cuts in June, potentially totaling 70 basis points (bps) throughout the year.

Fed Rate Cut Trajectory Seen as More Dovish:

  • In contrast, the Fed is expected to begin lowering rates in September, with cumulative cuts of 45 bps projected by year-end.

Eurozone GDP and US CPI Data on Watch:

  • This week’s key data releases for the Euro will be the preliminary Eurozone Q1 GDP figures on Wednesday. Eurostat forecasts suggest a steady growth of 0.3% and 0.4% on a quarterly and annual basis, respectively.
  • The US Consumer Price Index (CPI) data for April, also scheduled for Wednesday release, will be a crucial piece of information for the EUR/USD pair.

Technical Analysis: EUR/USD at a Crossroads

  • The EUR/USD has recovered from Friday’s losses and is currently trading near the 200-day exponential moving average (EMA) at 1.0780.
  • The pair is nearing the lower trendline of a symmetrical triangle pattern on the daily chart, indicating a potential breakout in either direction.
  • The 14-period RSI hovering between 40.00 and 60.00 reflects continued indecision among market participants.

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