Investing.com – The euro strengthened against the dollar on Wednesday, but faces a tough path to further gains as European Central Bank members continue to pave the way for rate cuts as soon as June.
rose 0.63% to $1.0837.
“The euro has become very difficult to rise against the US dollar and we continue to see risk skew pointing to EUR/USD weakness,” Macquarie said in a note on Wednesday, noting recent remarks from ECB members signaling rate cuts in June. .
ECB President Christine Lagarde opened the door to a June cut at the central bank’s March 7 meeting, hinting that if current inflation data continued to indicate a slowdown in price pressures, the bank could move to “a tapering phase of our policy.” cycle and make policies less restrictive.”
The latest EU economic data shows that the slowing inflation trend seen earlier this year has continued, with eurozone inflation slowing to 2.4% from 2.6% in March, the lowest level since the start of the Russia-Ukraine war in February 2022.
In a sign that the data may have softened some of the more hawkish members of the governing council, Austrian politician Robert Holzmann said on Wednesday that he had “no objections to policy easing in June,” although he added that he would “like to see data”. first.”
The statements were made ahead of the ECB meeting on April 11.
European inflation data stands in stark contrast to data from the United States, where consumer inflation unexpectedly rose in January and February, although the Fed’s preferred measure of inflation, the core consumer spending index, slowed to 2.8% over 12 months. through February from 2.9% a year earlier.
However, this contrast in inflation fortunes between the EU and the US is allowing the ECB to strike a more accommodative tone as it did not see a sharp rise in inflation in the first quarter, Macquarie said, keeping the dollar strong against the euro.
However, this strength will be tested again next week when the CPI inflation report for March is released on April 10.
But Macquarie is not confident US inflation will be high again in March, as rent inflation and “lower new car prices could help offset upward pressure from supply chain issues and higher fuel prices.”