The EUR/USD has appreciated as the US inflation report has strengthened the odds of the Fed implementing gradual policy easing in 2025. The CME FedWatch tool indicates a more than 90% probability that the Fed will maintain its current interest rates in January. Meanwhile, in the Eurozone, the European Central Bank (ECB)’s Boris Vujcic announced that the central bank intends to further reduce borrowing costs in 2025.
EUR/USD’s Performance in Asian Hours on Monday
EUR/USD remains steady following the gains from the previous session, trading around 1.0430 during the Asian hours on Monday. This upward movement of the pair can be attributed to the decline in the US Dollar (USD) after the release of the Personal Consumption Expenditures Price Index (PCE) data from the United States (US).
Details of US Inflation Data
The November inflation report showed that core PCE inflation year-over-year, which is the Fed’s preferred inflation measure, rose steadily by 2.8%, slower than estimates of 2.9%. The monthly core inflation grew moderately by 0.1%, against estimates of 0.2% and the prior release of 0.3%. The lower-than-expected US inflation data has reinforced the market sentiment that the Federal Reserve (Fed) will adopt a slower pace of additional cuts in 2025.
Key Appointments in US Administration
On Sunday, US President-elect Donald Trump announced key appointments to his administration. Scott Bessent has been chosen to lead the Treasury, Howard Lutnick will serve as Commerce Secretary, and Kevin Hassett will head the National Economic Council. Additionally, Andrew Ferguson has been selected to chair the Federal Trade Commission, while Jacob Helberg, a senior advisor to Palantir CEO Alex Karp, has been nominated as Secretary of State for Economic Growth, Energy, and Environment.
ECB’s Interest Rate Plan and Eurozone Factors
The ECB’s Boris Vujcic stated that the central bank plans to continue lowering borrowing costs in 2025, saying, “The direction is clear—it’s a continuation of the path from 2024, with further reductions in interest rates.” Moreover, the approval of taxation reforms by German lawmakers strengthens the Euro, as Germany is the largest economy in the Eurozone. These reforms will increase disposable income for households, boosting consumer demand and stimulating economic growth.
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