- EUR/USD rebounds to 1.0841 on the softer US Dollar.
- ECB’s Kazimir said the central bank won’t rush into cutting rates to avoid undoing progress on inflation.
- The Federal Reserve (Fed) is likely to keep its key interest rates steady for the fourth time in a row.
- The German and Eurozone Q4 Gross Domestic Product (GDP) reports are due on Tuesday.
The EUR/USD pair recovers some lost ground below the mid-1.0800s during the early Asian trading hours on Tuesday. The rebound of the major pair is driven by the modest decline of the US dollar (USD) and lower US Treasury bond yields. Investors await the advanced Q4 Gross Domestic Product (GDP) from Germany and the Eurozone ahead of the Federal Open Market Committee (FOMC) meeting on Wednesday. The major pair currently trades near 1.0841, adding 0.09% on the day.
The European Central Bank (ECB) Governing Council member Peter Kazimir said that the central bank won’t rush into cutting interest rates to avoid undoing progress on inflation. Kazimir added that it would be risky to act rapidly in response to short-term surprises without having more clarity about the medium term. Additionally, Bank of France governor François Villeroy de Galhau stated that the ECB will cut our rates this year and that everything will be open at the next meeting on March 7.
The advanced Q4 Eurozone Gross Domestic Product (GDP) is due on Tuesday, which is estimated to contract by 0.1% QoQ and remain steady on an annual basis. If the report shows a weaker-than-expected outcome, this could exert some selling pressure on the Euro (EUR) and act as a headwind for the EUR/USD pair.
Across the pond, the Federal Reserve (Fed) is likely to keep its key interest rates steady for the fourth time in a row. Nonetheless, there is a chance that the Fed might lower the rates by 25 basis points (bps) in March. According to the CME FedWatch Tool, futures traders have priced in a 45.9% likelihood that the Fed would cut interest rates for the first time this cycle in the March meeting.
Looking ahead, the German and Eurozone GDP growth numbers for Q4 will be released on Tuesday. On the US docket, US JOLTS Job Openings and the Consumer Confidence gauge by the Conference Board will be released. The attention will shift to the FOMC meeting on Wednesday.
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