EURUSD Edges Up as the USD Weakens

EURUSD edges up as the USD weakens and an ECB meeting looms. The market is currently trading around 1.0880 key level reflecting a reasonable gain for the day. This movement can be attributed to the weakening of the US dollar.

One of the primary drivers behind the weakening of the USD is the diminishing expectations of a rate cut by the Federal Reserve last year. The CME FedWatch Tool, which tracks market expectations of monetary policy, indicates a significant drop in the probability of a rate cut. In just one week, the probability has decreased from 80% to 50%.
 
Positive economic data from the US has played a role in shifting market sentiment. Strong figures in retail sales and the Consumer Sentiment Index have contributed to the belief that the US economy is performing well. This, in turn, has reduced the likelihood of a rate cut by the Federal Reserve.

Focus on the European Central Bank Meeting

As investors shift their attention to the upcoming ECB meeting, scheduled for Thursday, market participants eagerly await the remarks of ECB President Christine Lagarde. While no change in interest rates is expected, investors will closely monitor any indications of potential future rate cuts. Some market participants anticipate that the ECB may implement easing measures in the spring to stimulate inflation and bring it closer to the target of 2.0%.

Looking ahead, the focus will shift to major central bank meetings taking place this week. The Bank of Japan, Bank of Canada, Norges Bank, and the ECB will be in the spotlight as investors analyze their respective monetary policies and statements. Additionally, the European Commission is set to unveil proposals. This is aimed at bolstering its authority to scrutinize and potentially block foreign investments in sensitive industries. This move reflects concerns about trade vulnerabilities and reliance on external supplies.

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