EUR/USD touches fresh year-to-date low as traders brace for US inflation data

EUR/USD remains vulnerable amid uncertainty over a potential trade war between the Eurozone and the US.

ECB’s Rehn sees the Deposit Facility rate heading to the neutral rate in the first half of 2025.

Investors await US inflation data and speeches from a slew of Fed officials.

EUR/USD extends its losing spell for the fourth trading day and touches a fresh year-to-date (YTD) low of 1.0592 during the European session on Wednesday amid caution ahead of the United States (US) Consumer Price Index (CPI) data for October, which will be published at 13:30 GMT. 

The CPI report is expected to show that the annual headline inflation accelerated to 2.6% from 2.4% in September. The core CPI – which excludes volatile food and energy prices – rose steadily by 3.3%.

The inflation data will influence market expectations for the Federal Reserve’s (Fed) likely monetary policy action in December. The Fed is expected to cut interest rates again by 25 basis points (bps) to 4.25%-4.50% next month, according to the CME FedWatch tool. However, the likelihood has eased to 62% from 70% a week ago. Market expectations for a Fed interest rate cut in December have lately slightly faded as investors expect that the United States (US) economic outlook will improve and price pressures will escalate under President-elect Donald Trump’s administration.

Trump vowed to raise import tariffs by 10% and lower corporate taxes in his election campaign. This move will increase demand for domestic goods and boost labor demand and business investment, eventually prompting inflationary pressures and forcing the Fed to follow a more gradual rate-cut cycle.