The EUR/USD saw a dip into the lower $1.0900s following the release of higher-than-expected US CPI inflation figures for February. Despite this, the impact of elevated inflation, particularly driven by gasoline and energy prices, tempered the decline, resulting in the pair closing unchanged for the day at $1.0924.
There seems to be a growing consensus among members of the ECB Governing Council regarding the timing of potential rate cuts, with June emerging as the most probable window for initiating a policy easing cycle, though not before. In a recent interview, Robert Holzman, known for his hawkish stance on rates, indicated a higher likelihood of a rate cut in June rather than April, but emphasized that it's not yet a certainty. Holzman cautioned against cutting rates before the Fed, citing potential negative repercussions on the euro and investor sentiment. While the ECB maintains optimism about inflation progress, there are lingering doubts regarding the convergence to the 2% target by 2025, as indicated by the latest ECB staff projections. Given past misinterpretations of projections, the ECB advocates for a data-dependent approach, remaining open to action when necessary but avoiding premature decisions. Currently, the likelihood of June rate cuts stands at 83% across G3 central banks.
Today's economic calendar appears relatively light, with the release of EZ Feb industrial production figures imminent. Historically, the EUR/USD overnight ATM option price ahead of such releases hasn't deviated significantly from its average, suggesting investors tend to overlook these reports. With the latest option price at 4.57, expectations are low for increased volatility or substantial market reaction to the upcoming industrial production report. Forecasts anticipate EUR/USD to remain within a range of $1.0870 to $1.0920.
