Cooling German inflation reduces expectations for ECB tightening, pressuring the Euro against the US Dollar ahead of key data releases.
The EUR/USD pair fell to 1.1410 in early European trading on Wednesday, driven by declining bets on European Central Bank rate hikes. Germany’s June Consumer Price Index (CPI) inflation dropped to 2.3% from 2.5% expected, easing pressure on the ECB to act aggressively.
Market expectations had anticipated a 2.5% print, following May’s 2.6% reading. ECB President Christine Lagarde recently signaled no need for ‘forceful’ action, citing falling energy prices and absent wage-driven inflation risks. Traders now await Eurozone HICP data, which could shift sentiment if figures surprise to the upside.
Later Wednesday, US ADP employment and ISM Manufacturing PMI reports will draw attention, with Thursday’s Nonfarm Payrolls data expected to show 111,000 job additions in June. Technical indicators remain bearish, with the pair trading below key moving averages and RSI near 36.