Euro Slides to Five-Month Low Amid Rising US Dollar

On Monday, the euro (EUR) experienced a 0.19% decline against the US dollar (USD), marking a five-month low. This drop was attributed to the strengthening of the US dollar, driven by escalating tensions in the Middle East.

The US dollar’s upward trajectory was further supported by higher-than-anticipated retail sales data, diminishing the likelihood of a summer rate cut by the Federal Reserve (Fed). Market indicators suggest a mere 24% probability of a rate cut in June and a 56% chance in July. Conversely, investors anticipate the European Central Bank (ECB) to initiate its first rate reduction in June, with approximately 80 basis points (bps) of cuts expected by the ECB throughout 2024.

In February, the Eurozone witnessed a 6.4% decline in industrial production on an annual basis, while German inflation hovered near the official 2% target rate. These economic indicators have heightened speculations of the ECB’s intention to ease monetary policy sooner than the Fed.

During Asian and early European trading sessions, the EUR/USD pair remained relatively flat. However, volatility is expected throughout the day as the Eurozone releases its Trade Balance and ZEW Economic Sentiment Index reports at 9:00 a.m. UTC. Additionally, several Fed officials, including Fed Chair Jerome Powell, are scheduled to deliver speeches during the American trading session. Powell’s address at 5:15 p.m. UTC is anticipated to provide insights into the Fed’s sentiment and potential interest rate adjustments.

With the euro trading below the 1.06600 mark, the technical bias remains bearish, reflecting ongoing downward pressure on the euro against the US dollar.

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