- The core PCE price index showed an inflation increase of less than 0.3%.
- Markets have increased the odds of a Fed rate cut in June from 57% to 68.5%.
- The ECB’s Janis Sturnaras has called for a 100 basis point cut in interest rates this year.
Today’s EUR/USD forecast glows with bullish optimism as the dollar weakens, driven by an expected decline in the Fed’s preferred inflation gauge. The decline fueled speculation about a potential Fed rate cut.
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Notably, the core PCE price index showed inflation rose 0.3%, down from the previous reading of 0.5%. As a result, markets increased the odds of a rate cut in June from 57% to 68.5%. At the same time, market participants expect interest rates to decrease by 75 basis points this year. After the report, Fed Chairman Jerome Powell noted that inflation was similar to what the central bank wanted to see.
From here, investors will now focus on the jobs report for March. A resilient economy is likely to see the Fed maintain its current rate cut outlook. On the other hand, if jobs miss forecasts, there may be more pressure to cut rates, leading to higher rate cut expectations.
Meanwhile, the ECB’s Yiannis Sturnaras called for a 100 basis point cut in interest rates this year in the eurozone. That would lead to four rate cuts, putting the ECB in a better position than the Fed. Moreover, he noted that the ECB did not have to wait for the Fed to start cutting rates. A more dovish ECB would send EUR/USD down. Still, markets expect the Fed and ECB to start cutting interest rates in June.
EUR/USD key events today
EUR/USD Technical Forecast: Price finds respite, stops decline at 1.0775 support
On the technical side, the decline in EUR/USD is paused at the support level of 1.0775. The price is below the 30-SMA, making the bias bearish. At the same time, the RSI is trading in bearish territory below 50. The price was in a downtrend as it found solid resistance at the key level of 1.0950. Moreover, it was trading in a bearish channel.
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However, the bears weakened despite the lower declines. The RSI has made a bullish divergence that could lead to a reversal soon. Bulls will take over when price breaks above the 30-SMA.
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