Euro sits awaiting crucial data

The Euro is hovering around the 1.0765 mark after bouncing off the multi-week lows near 1.0720 as we gear up to enter the European trading session. The weaker US Dollar Index below the 105.00 mark provided some support to the major pair. Weaker than expected German inflation data on yesterday continues to weigh on the Euro and has raised speculation of rate cuts from the European Central Bank (ECB).

Dovish comments from many Federal Reserve is also helping the European currency suffer further losses and Cleveland Fed President Loretta Mester said on Tuesday that she expects rate cuts this year, but ruled out the next policy meeting in May. Meanwhile, San Francisco Fed President Mary Daly, stated she thinks three rate cuts in 2024 seem "reasonable," but she needs more convincing evidence to confirm it. Futures traders anticipate the US Fed to start easing in the June meeting and to cut by three-quarters of a percentage point by the end of the year.

German inflation eased slightly more than expected in March, the lowest in almost three years, the German statistics office Destatis reported on Tuesday. The preliminary German Harmonized Index of Consumer Prices (HICP) rose 0.6% MoM in March, slightly below the estimation of a 0.7% MoM rise. The year-on-year rate of HICP rose 2.3%, below the market consensus of 2.4%.

 The softer inflation indicated Germany is nearing the European Central Bank's (ECB) target of 2%, raising market hopes for an imminent interest rate cut which market participants now expect in July.

Looking further ahead today, the main drivers of the EUR/USD currency pair will be the release of consumer price index figures and the unemployment rate from the Eurozone as a whole.

In the American session traders will await the release of the ADP employment change and global services PMI figures which will be followed up by a monetary speech from US Federal Reserve President Jerome Powell. The later will be the major news of the day as Mr Powell is expected to update the market on interest rate expectations from the Fed moving forward.