EUR/USD hovers near 1.0900 with an improved risk appetite

• EUR/USD received support after the lower CPI and Retail Sales data released on Wednesday.
• US Dollar depreciated due to lower US Treasury yields.
• The Euro appreciates on increasing expectations for a convergence in monetary policy between the Eurozone and the US.

EUR/USD treads water to continue its winning streak for the fourth session, trading around 1.0880 during the Asian hours on Thursday. The US Dollar’s (USD) decline is contributing to pressure on the EUR/USD pair, which could be attributed to the improved risk appetite.

On Wednesday, the lower-than-expected monthly Consumer Price Index (CPI) and Retail Sales data in the United States (US) supported the probability of multiple rate cuts by the Federal Reserve (Fed) in 2024. US CPI decelerated to 0.3% month-over-month in April and came in at a lower-than-expected 0.4% reading. While Retail Sales flattened, falling short of the expected increase of 0.4%.

The US Dollar Index (DXY), which gauges the performance of the US Dollar (USD) against six major currencies, hovers around 104.20. The decline in the US Treasury yields is weakening the Greenback. The 2-year and 10-year yields on US Treasury bonds stand at 4.71% and 4.32, respectively, by the press time.

On the Euro side, on Wednesday, the seasonally adjusted Gross Domestic Product (GDP) for the Eurozone expanded by 0.3% quarter-on-quarter in the first quarter, meeting expectations. This growth signals a recovery from the 0.1% contraction experienced in each of the previous two quarters. Additionally, the annual growth rate matched expectations at 0.4%.

The Euro receives support from increasing expectations for a convergence in monetary policy between the Eurozone and the United States (US). The European Central Bank (ECB) is anticipated to lower rates during its upcoming meeting in June. While, market expectations are rising for the Fed to commence interest rate cuts from September, particularly after core inflation slowed in April for the first time in six months.