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May 13 - 02:55 PM

Danske: EUR/USD into April CPI: Range-Trande with Upside Tilt

By eFXdata  —  May 13 - 01:30 PM

Synopsis:

Danske Bank provides insights on the near-term trajectory of EUR/USD, expecting the currency pair to range-trade with a potential upside tilt influenced by market dynamics and upcoming economic data releases.

Key Points:

  • Current Trading Range: EUR/USD is navigating between 1.07 and 1.08, with FX volatility at lower levels contributing to a resurgence in carry trades.
  • Market Expectations: The market has stabilized its expectations for Federal Reserve rate cuts in 2024 at around 45 basis points, following recent Fed communications and labor market data.
  • Influence of Upcoming Data: This week’s US CPI data is pivotal, with the consensus predicting a slight decrease in core inflation. The outcome could impact US yields and Fed rate cut timing, potentially tilting earlier than the currently anticipated September.

Conclusion:

Danske Bank suggests that while EUR/USD is likely to maintain its current range, there exists an upside risk due to the potential for lower-than-expected US inflation and overstretched USD positioning.

Source:
Danske Research/Market Commentary

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