EUR/USD flattens near 1.05 in the run-up to EU inflation figures

• EUR/USD struggled to find momentum on Tuesday, stuck near 1.0500.
• The trading week has been shortened by a US holiday on Thursday, limited Friday hours.
• EU inflation figures are due on Friday, with a thin calendar until then.

EUR/USD cycled the 1.0500 handle on Tuesday, with Fiber price action drifting into the near-term middle ground as directional momentum drains out of the pair. The economic calendar is an overall thin affair this week, with the US Thanksgiving holiday on Thursday trimming late-week market momentum. US markets will also see limited trading hours on Friday, further crimping the week's potential for big plays.

According to the Federal Reserve's (Fed) latest Meeting Minutes, members of the Federal Open Market Committee (FOMC) continue to remain cautious about the pace of rate cuts looking forward. Overall, the Fed's key group of policymakers seemed to agree that downside risks in the employment landscape and inflation outlook have decreased. Still, the pace of rate cuts is unlikely to accelerate further unless weak points open up in the jobs market and price growth starts to slump. According to the CME's FedWatch Tool, rate traders have slightly solidified bets of a 25 bps rate trim when the Fed makes its final rate call of 2024 on December 18, with rate markets pricing in 60% odds of a quarter-point rate cut and the remaining 40% expecting a rate hold.

This week sees a firm drought of EU-based datapoints through most of the week, with a fresh round of European Harmonized Index of Consumer Prices (HICP) inflation slated for Friday. Preliminary pan-EU HICP inflation for November is set to swing higher on an annualized basis, a looming threat that European Central Bank (ECB) policymakers have been scrambling to get out in front of. According to ECB officials, a near-term uptick in broad EU inflation metrics shouldn't be a cause for concern for investors.

Wednesday will bring another update to US Personal Consumption Expenditure Price Index (PCEPI) inflation, a key reading of price increases underpinning the US economy. Wednesday also brings a quarterly update of US Gross Domestic Product (GDP) growth. Annualized core PCEPI inflation is set to accelerate again in October and forecast to increase to 2.8% from the previous 2.7%. QoQ US GDP growth in the third quarter is expected to hold steady at 2.8%.

EUR/USD price forecast

EUR/USD caught a bid on Greenback softness to retest the 1.0500 handle earlier this week. However, Fiber buyers remain unable to break through the key technical metric neatly, and the pair is set to continue struggling with familiar technical barriers in the near term. EUR/USD price action has found some breathing room after hitting a 24-month low late last week, but the climb up is looking very far for Fiber bulls to reclaim anything approaching bullish territory.

EUR/USD daily chart