Softer US inflation data reduces bets on further Federal Reserve tightening, lifting the euro against the dollar.
The EUR/USD pair climbed to 1.1580 in early Asian trading on Wednesday, extending gains as the US dollar weakened. The move follows softer-than-expected US inflation data, which has dampened expectations for additional Federal Reserve rate hikes.
Prior to the data release, the pair had traded near 1.1550, with markets pricing in a more aggressive Fed stance. Comparable periods of dollar softness have often coincided with shifts in monetary policy expectations, particularly when inflation readings undershoot forecasts.
The immediate market reaction saw mild gains for the euro, reflecting reduced demand for the dollar as investors recalibrate Fed policy bets.