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Feb 27 - 01:55 PM

EUR/USD - COMMENT-Traders Eye EZ CPI, US PCE To Spark Life Into EUR/USD

By Justin Mcqueen  —  Feb 27 - 11:45 AM

Narrow ranges prevail across the major G10 currencies with EUR/USD trading within the parameters set by the 200 and 55-DMAs (1.0828-1.0887).
Limited rate divergence and muted volatility has kept FX rather subdued.
Thus, market attention now rests on the upcoming euro area inflation readings and the U.S. core PCE figures to potentially spark some life into the FX market.

This week’s euro area inflation report will be particularly noteworthy given that this will set the tone for the European Central Bank’s March meeting.
The recent rhetoric from policymakers has been about leaning against market pricing which had signalled pre-June rate cuts.

Consequently, year-end pricing shows 88bps of easing, down from 158bps at the beginning of the month 0#ECBWATCH.
Meanwhile, the probability of an April cut is at 35% (or 8.6bps).
What’s more, given the move higher in EUR/USD from 1.07 to the mid-1.08s, risks are beginning to look asymmetrical, whereby a downside CPI surprise prompts a larger market reaction than a hotter than expected print.

Should euro zone CPI miss expectations, this would likely open the door for the single currency to retest the February trough at the 1.07 handle.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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