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The EUR/USD pair rose to 1.1425 in early Asian trade as softer-than-expected U.S. inflation data reduced pressure on the Federal Reserve to maintain aggressive rate hikes. The U.S. Dollar weakened against the Euro amid speculation that the Fed may delay further tightening, with the core CPI report showing a slower-than-anticipated increase in prices. This development boosted risk appetite and supported the Euro, which had been under pressure earlier in the week.
For traders, the move highlights the sensitivity of currency pairs to macroeconomic data and central bank policy expectations. A weaker USD benefits non-U.S. assets and commodities priced in Dollars, potentially impacting Gulf investors with exposure to European markets or USD-denominated liabilities. The Euro's strength also raises questions about the European Central Bank's (ECB) policy trajectory, as divergent monetary paths between the Fed and ECB could widen.
Markets will now focus on the Fed's upcoming policy meeting for clarity on rate decisions. Key levels to watch for EUR/USD include 1.1450 (resistance) and 1.1350 (support). Traders should monitor inflation expectations and any shifts in Fed officials' rhetoric, as these could drive volatility in the near term.
