EUR/USD climbed to 1.0900 as softer US CPI data eased Fed hike expectations, with traders now eyeing Friday's PCE report for the next directional move.
Alpha Score of 62 reflects moderate overall profile with moderate momentum, weak value, strong quality, moderate sentiment.
The dollar fell broadly on Monday after last week's US consumer price index came in softer than expected, reducing the odds of another Federal Reserve rate increase. The euro climbed to $1.0900, its highest in two weeks, while sterling touched $1.2750. The moves reversed a month-long dollar rally that had been built on hawkish Fed commentary and sticky inflation prints.
Traders said the April CPI report, while still elevated at 3.4% year-on-year, showed enough deceleration in core services to push the first rate-cut probability back toward 50% by September. The CME FedWatch tool, which tracks short-term rate expectations, now implies a 48% chance of a quarter-point cut at the September meeting, up from 38% before the data.
Treasury yields fell across the curve, with the two-year note dropping 8 basis points to 4.85%. Lower yields undermined the dollar's carry advantage, a key driver of the greenback's strength in recent months. The dollar index, which measures the currency against six major peers, slipped 0.4% to 105.20.
The next catalyst is Friday's personal consumption expenditures price index, the Fed's preferred inflation gauge. If the PCE print confirms the cooling trend, traders expect the dollar to face further pressure, with EUR/USD targeting the $1.0950 area. If it surprises to the upside, the dollar could regain its footing ahead of the June Fed meeting.
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