Euro awaits crucial US data

The Euro continues to lose ground for the third day as we get ready to enter the European trading session after a disappointing round of data earlier this morning from Germany. Retail Sales in Europe’s largest economy dropped 1.9% MoM in February, slowing from a 0.4% decline in January, according to the official data released by Destatis on Thursday. The data missed the market expectations for a 0.3% increase. Retail Sales fell 2.7% YoY in February versus a 1.4% annual drop reported in January, much below the forecast of -0.8%.

This pushed the European currency towards the 1.08 mark and now traders will await some major economic news from the US which may determine when the US Federal reserve will move on interest rates over the coming months.

Conflicting opinions among members of the Federal Open Market Committee (FOMC) regarding monetary policy easing are contributing to market confusion which leaves market participants sitting on the sidelines regarding the EUR/USD currency pair.

Federal Reserve Board Governor Christopher Waller maintains his stance of 'no rush' to cut rates, citing persistent inflation data. Atlanta Fed President Raphael Bostic echoes a similar sentiment, anticipating only one rate cut this year, warning against premature rate reductions that could exacerbate economic disruptions.

The Euro faces downward pressure as European Central Bank (ECB) officials are increasingly suggesting a probable interest rate cut in June. Yannis Stoumaras remarked on Tuesday that there is a mounting consensus within the ECB for a rate reduction in June, a sentiment echoed by Madis Muller, who hinted at the ECB nearing a point where rate cuts are feasible.

Today's release of the Core Personal Consumption Expenditures (PCE) Price Index data for February which is considered the Fed’s preferred gauge of inflation, is being held up as the next oracular event for determining when the Fed could cut interest rates.

A higher-than-expected inflation reading in line with most recent gauges of inflation in the US could push back further the time when the Fed is expected to cut interest rates, with negative consequences for EUR/USD.