The euro edged higher against the U.S. dollar, with EUR/USD surpassing the 1.0400 level, as traders positioned themselves ahead of the latest Eurozone inflation report. The pair’s gains were supported by a slightly weaker dollar, as investors reassessed expectations for future Federal Reserve policy moves.
Market participants are closely watching the Eurozone Harmonized Index of Consumer Prices (HICP), which could influence the European Central Bank’s (ECB) stance on interest rates. A stronger-than-expected inflation reading may reinforce the ECB’s cautious approach, while any signs of easing price pressures could increase speculation about future rate cuts.
Meanwhile, the U.S. dollar remains under pressure, as mixed economic data and shifting Federal Reserve expectations have dampened its recent strength. Traders are awaiting key U.S. releases later this week, which could provide more clarity on the Fed’s next steps. While the central bank has maintained a data-dependent approach, uncertainty over inflation trends and labor market resilience continues to weigh on the greenback.
Despite the euro’s recovery, EUR/USD faces strong resistance near 1.0450, a level that could cap further upside unless the inflation data surprises to the upside. If the report comes in weaker than expected, the pair could retreat toward 1.0350, where buyers may look to step in.
For now, euro traders remain cautious, with inflation data likely to set the tone for the pair’s next move. A higher reading could provide the euro with additional support, but downside risks remain if the figures point to a cooling price environment.
