- The EUR/USD is positioned to trade positively around 1.1195 during Wednesday’s Asian session.
- US CPI inflation dipped slightly below the April expectations.
- After discussions between the US and China, traders are revising their expectations for an ECB rate decrease.
During the Asian trading hours on Wednesday, the EUR/USD pair is set to hover near 1.1195. The USD has weakened against the EUR as a result of cooler-than-expected inflation data from April. Traders are now awaiting the German HICP data, scheduled for release later in the day, for potential market movement.
In the US, inflation measured by the Consumer Price Index (CPI) dropped to 2.3% in April from 2.4% in March, marking the lowest level since February 2021. Core CPI, which excludes food and energy prices, increased by 2.8% year-on-year in April, aligning with previous estimates. Following this report, the US dollar lost value as traders reacted to the softer CPI figures.
In another development, the US and China have reached an agreement to lower tariffs on each other’s goods after two days of talks in Geneva, Switzerland. The US has reduced its tariffs on Chinese imports from 145% to 30%, while China has lowered tariffs on US products from 125% to 10%. This optimistic news about easing trade tensions seems to be giving traders pause on recession fears, potentially supporting the greenback in future trades.
Meanwhile, the markets in Europe are reevaluating their expectations for interest rate cuts from the European Central Bank (ECB) due to the improving trade and geopolitical situation. Money markets are indicating that deposit facility rates could be around 1.80% by the end of the year, a few basis points higher than the levels observed in mid-April, prior to indications that the ECB might consider a rate cut.
