EUR/USD mostly flat with US CPI data, ECB meeting in sight

The EUR/USD currency pair remained stuck in a tight trading range on Wednesday as market players awaited the outcome of the ECB’s April policy meeting and fresh US CPI data prints.

The European Central Bank is largely expected to leave the main refinancing operations rate unchanged at a 22-year high of 4.5% and the deposit facility rate – at an all-time high of 4%.

The ECB press conference will be closely watched for clues on the timing of the first rate cut.

ECB officials have agreed that it is premature to talk about interest rate cuts amid elevated underlying inflationary pressures.

The central bank has forecast headline inflation to average 2.3% this year, compared to 2.7% in the December projection, while the core inflation rate is forecast at 2.6%, compared to 2.7% in the prior projection.

Wednesday’s market focus will be on the US inflation report, which may provide more clues on the Federal Reserve’s interest rate trajectory.

Annual headline consumer inflation in the United States probably picked up to 3.4% in March, according to market consensus, from 3.2% in February.

Annual core CPI inflation probably eased to 3.7% in March from 3.8% in February – an almost three-year low.

Markets are now pricing in about a 57% chance of a Fed rate cut occurring in June, compared with 49% earlier this week, according to the CME FedWatch tool.

About 65 basis points of rate cuts are now priced in, compared with 75 basis points projected by the Federal Reserve.

Currency Pair Performance

As of 7:59 GMT on Wednesday the EUR/USD currency pair was inching down 0.02% to trade at 1.0855.

Yesterday the major Forex pair went up as high as 1.0885. The latter has been the pair’s strongest level since March 21st (1.0942).