Epiphany Week EURUSD: Fed Minutes and Eurozone CPI

The EUR/USD pair faces a pivotal week as key economic events on both sides of the Atlantic could shape market sentiment. Investors will closely monitor the Eurozone Consumer Price Index (CPI) and the U.S. Federal Reserve (Fed) minutes amid growing concerns over inflation and its impact on monetary policy.

Focus on the Eurozone: Inflation and Employment
Despite the Epiphany holiday, Monday will bring important data, including the Eurozone Composite Purchasing Managers' Index (PMI) and Germany’s CPI. These figures will provide an early insight into the region's economic activity and inflationary pressures.
The main event will be Tuesday's release of December's Eurozone CPI. Following a prior increase to 2.3%, the market will assess whether inflation continues to exceed expectations. Additionally, the Eurozone unemployment rate, which remains at 6.3%, will shed further light on the labor market's health.
On Wednesday, Eurozone consumer confidence, previously at -14.5 points, will be published. However, the spotlight will be on the Fed minutes, which are expected to reveal discussions among Federal Open Market Committee (FOMC) members about the pace of rate cuts projected for 2025. Diverging views, driven by persistent inflation and the strength of the U.S. economy, could add volatility to the EUR/USD.

Key U.S. Indicators: A Packed Schedule
Friday shifts the focus to the U.S., with the release of December's employment report, including non-farm payrolls (NFP), expected to decline to 153,000 from November's 227,000. Historically, December's figures often surpass forecasts, potentially introducing volatility to the pair. The unemployment rate, projected to remain at 4.2%, and the University of Michigan’s Consumer Sentiment Index will also be released.

EUR/USD Outlook
The euro faces downward pressure against the dollar due to diverging economic momentum and monetary policies between the two regions. A stronger-than-expected U.S. labor market could bolster the dollar, especially if the Fed minutes signal caution in rate cuts.
Conversely, a higher-than-expected Eurozone CPI could temporarily support the euro. However, broader economic challenges in the region may cap potential gains.
Epiphany Week promises significant volatility for the EUR/USD, with inflation, employment, and monetary policy as critical factors for investors navigating this dynamic landscape.
Ion Jauregui –ActivTrades Analyst






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