EUR/USD Slips Near 1.0550 Amid ECB Rate Cut Speculations

The EUR/USD pair edges lower toward 1.0550 during Monday’s Asian trading session, maintaining a mild negative bias. Traders are gearing up for a busy week, with the U.S. Consumer Price Index (CPI) inflation report for November scheduled for Wednesday and the European Central Bank (ECB) interest rate decision on Thursday taking center stage. Both events are expected to shape the market’s outlook.

Market speculation about a potential quarter-point rate cut by the Federal Reserve (Fed) on December 18 intensified last week. The optimism stems from a robust U.S. jobs report that, while strong, is not deemed significant enough to prevent Fed officials from lowering rates to a target range of 4.25%-4.5%, down from the current 4.5%-4.75%.

However, upcoming U.S. inflation data could prove pivotal. The annual CPI for November is expected to rise to 2.7% year-over-year, up from October’s 2.6%, while core inflation, excluding food and energy, is anticipated to remain steady at 3.3% year-over-year. Should the data meet or exceed expectations, it could bolster the case for another rate cut from the Fed later this month.

Across the Atlantic, the ECB is widely expected to announce its fourth interest rate cut of the year during Thursday’s policy meeting. Analysts anticipate the ECB will maintain a cautious, data-dependent stance, avoiding commitments to a fixed rate trajectory. However, ECB President Christine Lagarde’s press conference will be closely scrutinized for insights into future monetary policy. Dovish commentary from ECB officials could exert additional pressure on the Euro, further supporting the US Dollar.