EUR/USD holds below 1.10000 ahead of US PPI data

• EUR/USD gains ground near 1.0983 despite the firmer USD. 
• ECB’s Lagarde said interest rates in the eurozone had reached their peak, but she didn’t provide the timeline for a possible cut to borrowing costs.
• US Consumer Price Index (CPI) for December rose 3.4% YoY vs. 3.1% prior, stronger than expected.
• The US Producer Price Index (PPI) on Friday will be closely monitored by traders.

The EUR/USD pair holds positive ground despite renewed US dollar (USD) demand during the early Asian session on Friday. The uptick of the major pair is supported by the risk-on environment ahead of the US key data. At press time, EUR/USD is trading at 1.0983, gaining 0.11% on the day.

The Labor Department revealed on Thursday that the US Initial Jobless Claims for the week ending January 6 reached the lowest level since mid-October, declining by 1,000 to 202,000 from the previous week's revised reading of 203,000.

Furthermore, the US Consumer Price Index (CPI) for December grew 3.4% YoY from the previous reading of 3.1%, above the market consensus of 3.2%. The Core CPI, which excludes volatile food and energy prices, climbed 3.9% YoY in December, stronger than the expectation of 3.8%.

Traders anticipate that the FOMC will delay a rate cut as both inflation and labor market data did not support it. According to the CME Group’s FedWatch tools, the market is pricing in 64% odds of a March rate cut, slightly lower than last week.

The European Central Bank (ECB) President Christine Lagarde said on Thursday that the 'hardest part was likely over and interest rates would be cut if the ECB had the certainty that inflation had fallen to the 2% level. Lagarde added that interest rates in the eurozone had reached their peak after rising rapidly in response to high inflation last year. Traders have priced in at least five rate cuts in 2024, with the first move beginning in March or April.

Later on Friday, the Consumer Price Index (CPI) from France and Spain will be released, and ECB Philip Lane is set to speak. On the US docket, the Producer Price Index (PPI) will be released, which is forecast to show an increase of 1.3% YoY in December.