EUR/USD posts modest gains above 1.0950 ahead of Eurozone Industrial Production data

• EUR/USD holds positive ground above the mid-1.0900s amid the USD weakness.
• European Central Bank (ECB) officials emphasized the need to wait for more data before making decisions on rate normalization.
• The US Producer Price Index (PPI) unexpectedly dropped in December.
• Investors will focus on Eurozone Industrial Production, due later on Monday.

The EUR/USD pair posts modest gains during the early Asian session on Monday. The softer US Dollar (USD) and risk-on environment lend some support to the major pair. Due to the lack of top-tier US economic data from the US due to the Martin Luther King Jr. holiday, risk sentiment is anticipated to remain the primary driver of the major pair price movement. EUR/USD currently trades near 1.0953, up 0.03% on the day.

The European Central Bank (ECB) officials emphasized the need to wait for additional economic data before making decisions on rate normalization. On Saturday, ECB chief economist Philip Lane stated that the central bank will have important data by June to decide on a likely series of interest rate cuts, but moving prematurely may prove self-defeating. Last week, ECB President Christine Lagarde said that the 'hardest and worst bit' regarding inflation was likely past, and the interest rates would be cut if the ECB had confidence that inflation had fallen below 2%.

Across the pond, the US Producer Price Index (PPI) unexpectedly dropped in December, which triggered the potential that the Federal Reserve (Fed) will begin cutting interest rates this year. According to data released on Friday by the Bureau of Labor Statistics, the PPI rose 1.0% annually in December from November’s reading of 0.8%, while the core PPI was flat for the month, bringing the yearly increase down from 2.0% to 1.8%. With the signal of cooling inflation, investors anticipate additional monetary easing through 2024. The markets place a bet on 160 basis points (bps) of rate cuts from the Fed this year.

Traders will take more cues from ECB speakers this week, including Villeroy (Tuesday) and Nagel (Wednesday). Also, the ECB President Lagarde is set to speak on Wednesday, Thursday, and Friday. Apart from this, ECB Minutes will be released on Thursday.