The EUR/USD pair has been under pressure this week, falling towards the 1.1830-1.1840 area, driven by a combination of weak Eurozone economic sentiment and strengthening US dollar demand. The Eurozone Economic Sentiment Index declined to 39.4 in February, and German inflation contracted in January, raising concerns about potential ECB monetary easing. Conversely, expectations of a potential early rate hike by the Bank of Japan have bolstered the Yen, negatively impacting EUR/JPY. Market attention is now heavily focused on the release of the FOMC minutes, US GDP data, and the PCE core inflation index, which will influence expectations regarding the Federal Reserve’s future policy path. The market currently anticipates the first rate cut in June. While geopolitical tensions involving Iran contribute to risk-off sentiment, improved US economic prospects and a potentially less aggressive stance from former President Trump are supporting the USD. EUR/GBP saw gains due to soft UK labour data fueling BoE rate cut bets. The New Zealand dollar weakened following a dovish hold by the RBNZ.
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