EUR/USD Eyes Recent Highs Amid Softer US PPI Data

Here's what you should know for Wednesday, January 15

Author

AtoZ Markets
January 15, 2025

It’s been another rough day for the US Dollar, giving EUR/USD room to bounce back. After dipping into the 1.0180-1.0175 range earlier this week, the pair reclaimed the 1.0300 level and climbed higher.

The US Dollar Index (DXY) has also pulled back, slipping into the low 109.00s from Monday’s highs above 110.00. Investors are digesting news of potential gradual tariffs under the incoming Trump administration, paired with disappointing US Producer Price data that dented hopes for a stronger Dollar.

Waiting for Big Data

Markets are holding their breath as key US data approaches. Eyes are on the Consumer Price Index (CPI), Retail Sales figures, and comments from Federal Reserve officials later this week.

The Fed is still in focus after recent Nonfarm Payrolls data (+256K in December) tempered expectations for aggressive rate cuts. While the central bank cut rates by 25 basis points to 4.25%-4.50% in December, Fed Chair Jerome Powell signalled a cautious approach going forward, reiterating the commitment to a 2% inflation target.

ECB's Next Move

Across the Atlantic, the European Central Bank (ECB) continues its rate-cutting cycle despite rising inflation. ECB policymakers stress the need for patience, citing persistent core inflation as a key concern.

What to Watch

Upcoming events could add more volatility. Key dates include:

  • January 15: Eurozone Industrial Production

  • January 16: Germany’s final Inflation Rate and ECB meeting accounts

  • January 17: Final inflation report for the eurozone

Bottom Line

EUR/USD is trying to shake off headwinds from a strong US Dollar and diverging monetary policies between the Fed and ECB. Immediate resistance sits at 1.0436, with support levels near 1.0176 and parity.

While the broader bearish trend persists, signs of momentum could give bulls something to work with. For now, cautious optimism rules the day.

 Meanwhile, the US Dollar flexed its strength. The Dollar Index hit a two-year high in December, fueled by Donald Trump's election victory and the Republicans’ control of Congress. Optimism about his tax and fiscal policies drove Wall Street to record highs, even as inflationary risks stirred concerns.

 Looking to 2025, the economic divergence between the US and the Eurozone seems likely to widen. While the Fed signals fewer rate cuts ahead, citing resilient growth, the ECB faces the tough task of propping up an economy weighed down by political and economic woes.

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