EUR/USD Under Pressure After US Inflation And Fed Minutes

EUR/USD fell to 1.0739, a sharp drop of 1.1%, and was at 1.0740 at the time of writing. The decline came after U.S. inflation data, which fueled hawkish bets on the Federal Reserve. The minutes of the March Fed meeting did not elicit any reaction from the market.

The Consumer Price Index (CPI) released by the U.S. Bureau of Labor Statistics (BLS) on Wednesday showed that U.S. inflation rose to 3.5% in March from 3.2% in February. This beat consensus forecasts of 3.4%. Core inflation, which strips out fluctuations in food and energy costs, rose 3.8% on an annual basis, mirroring gains in February. Inflation and core inflation both came in at 0.4% monthly, above analysts’ forecasts of 0.3%. Affected by this, US Treasury yields soared, while the probability of the Federal Reserve cutting interest rates in June dropped to more than 20%. A combination of hawkish bets and rising yields sent the dollar higher during the session.

On the other hand, Fed meeting minutes showed that participants generally lacked confidence in the persistence of high inflation, with recent data failing to bolster their confidence that the economy will cool and inflation will steadily reach its 2% target. With inflation and the labor market remaining hot, officials may change their rhetoric and slowly give up on the possibility of the Fed cutting interest rates in June.

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