Euro gains crucial ground

EUR/USD launched higher on Wednesday, climbing after broad-market risk appetite surged following a cooler-than-expected print in US Consumer Price Index (CPI) inflation, but a hawkish tilt to the Federal Reserve’s latest update to its dot plot of interest rate expectations crimped market sentiment to round out the day. 

Forex Today: US inflation dominates headlines 

According to the Federal Open Market Committee (FOMC) and its Summary of Economic Projections (SEP), only a single quarter-point rate cut is now expected in 2024. Market hopes for Fed rate cuts have steadily clashed with the Federal Reserve’s own rate cut expectations through 2024, and according to the CME’s FedWatch Tool, rate markets are still pricing in over 60% odds of at least a 25 basis-point rate trim on September 18. 

Eurogroup meetings on Thursday and Friday, pan-European Industrial Production figures, and several speeches from European Central Bank (ECB) policymakers will wrap up the trading week’s Euro events, while US jobless claims and the Michigan Consumer Sentiment Index will provide perspective after the Fed’s latest rate call. 

European Industrial Production figures for April are slated for Thursday, with median market forecasts expecting figures to ease to 0.2% MoM compared to the previous 0.6%. US Initial Jobless Claims for the week ended June 7 are expected later on Thursday, with investors expecting 225K new jobless claimants compared to the previous week’s 229K. 

A handful of speeches from ECB central planners smatter Friday’s economic calendar, and the University of Michigan’s Consumer Sentiment Index for June is expected to recover to 72.0 from 69.1.