EUR/USD falls from 1.0990 as US Dollar recovers ahead of US Inflation data

• EUR/USD drops to near 1.0960 amid firm recovery in the US Dollar ahead of US CPI data.
• Fed policymakers denies favoring for early interest rate cuts.
• The Euro performs strongly as ECB policymakers have not discussed rate cuts at all.

The EUR/USD pair faces selling pressure while attempting to sustain above the crucial resistance of 1.0980 in the London session. The major currency pair corrects as the US Dollar Index (DXY) has recovered its entire losses generated in the Asian session. The USD Index has rebounded to near 102.40.

S&P500 futures have generated decent gains in the European session, portraying further improvement in the risk-appetite of the market participants. The 10-year US Treasury yields are hovering below 4%.

Investors are expected to face sheer volatility after the release of the United States Consumer Price Index (CPI) data for December, which will be published at 13:30 GMT. The headline inflation is expected to increase slightly while the core CPI is seen decelerating due to fall in prices of used cars.

Meanwhile, Fed policymakers continue to stay with a restrictive monetary policy stance until gets confidence that inflation will return to 2% in a sustainable manner. New York Fed Bank President Raphael Bostic said on Wednesday that more work is needed to achieve the 2% inflation target and it is still too early to discuss rate cuts.

On the Euro front, the broader performance from the old continent’s currency continues to remain upbeat as a rebound in preliminary Eurozone inflation has provided an argument to European Central Bank (ECB) policymakers to maintain the ‘higher for longer’ interest rates narrative.

ECB Governing Council member and Bank of France President, Francois Villeroy de Galhau, said on Thursday that he “commits to an inflation back at 2.0% by 2025.” He added that the French economy is expected to grow by 0.9% in 2024.