The EUR/USD pair received a boost from the 1.0800 level on Tuesday, but concerns arise as analysts from ING delve into the currency pair’s future prospects.
With soft January Consumer Price Index (CPI) releases anticipated from Germany and France, ING economists express apprehension about potential repercussions. The expected lower CPI figures, attributed to base effects, may amplify concerns and raise the likelihood of an April European Central Bank (ECB) rate cut. Although ING emphasizes that an April rate cut is not their primary scenario, they assert that it introduces a soft tone to EUR/USD as the week progresses towards the eagerly awaited US jobs data on Friday.
While ING’s fundamental stance doesn’t explicitly endorse an April ECB rate cut, they believe that the prospect lingers, influencing a cautious outlook for EUR/USD. The baseline view articulated by ING leans towards the EUR/USD pair testing the lower boundary of the 1.0800-1.0875 range in the lead-up to the Federal Open Market Committee (FOMC) developments.
Investors are advised to closely monitor the forthcoming French and German CPI reports for January, as they could significantly impact the trajectory of the EUR/USD pair amid evolving economic conditions and central bank considerations.