EUR/USD Latest – ECB Set to Cut Rates Next Week Despite Rising German Inflation
- German inflation y/y rose to 2.4% in May from 2.2% in April.
- Financial markets price in a 90%+ chance of a 25bp ECB rate cut next week.
- EUR/USD listless around 1.0850.
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Preliminary German inflation data for May shows annual inflation moving higher but monthly inflation moving lower. Annual inflation edged up to 2.4%, in line with market expectations, from 2.2%, while monthly inflation rose by just 0.1%, compared to expectations of 0.2% and a prior month’s reading of 0.5%. The final results will be published on June 12.
![image1.png](https://a.c-dn.net/b/0KL3Fa/image1.png)
The ECB is set to start cutting interest rates next week, despite today’s data. Financial markets are currently pricing a 90%+ chance of a 25 basis point cut at next week’s monetary policy meeting. A second cut is nearly fully priced-in for the October 17 meeting, although the September meeting is live, with a third cut at the December meeting a strong possibility. It is now looking likely that the ECB will cut rates twice before the Fed begins to loosen monetary policy.
![image2.png](https://a.c-dn.net/b/29C0kl/image2.png)
The Euro ignored today’s uptick in German inflation and remained in a tight 32-pip range against the US dollar. The main data release this week, US Core PCE on Friday at 13:30 UK, is currently stifling FX activity and volatility, leaving traders watching from the sidelines. EUR/USD closed Monday at 1.0857, opened and closed on Tuesday at 1.0857, and opened today’s session at 1.0857.
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EUR/USD Daily Price Chart
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Retail Trader Sentiment Analysis: EUR/USD Bias Remains Mixed
According to the latest IG retail trader data, 41.46% of traders are net-long on the EUR/USD pair, with the ratio of short to long positions standing at 1.41 to 1. The percentage of net-long traders has increased by 4.35% from the previous day but declined by 6.59% compared to last week. Simultaneously, the number of net-short traders has decreased by 10.27% from yesterday and 2.78% from last week.
Typically, contrarian trading strategies that go against the crowd sentiment tend to yield better results. With traders currently leaning towards a net-short bias, this could potentially signal further upside for the EUR/USD pair. However, the mixed positioning data, with a less net-short stance than yesterday but a more net-short stance compared to last week, suggests a mixed trading bias for the EUR/USD currency pair.
While retail trader sentiment can provide valuable insights, it is essential to consider other technical and fundamental factors when making trading decisions.
Change in | Longs | Shorts | OI |
Daily | -9% | 5% | -1% |
Weekly | -35% | 54% | 3% |
What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.