EUR/USD holds gains above 1.0400 as rising odds of the ECB delaying further rate cuts

• EUR/USD appreciates as traders expect the ECB to delay its further rate cuts due to a recent uptick in inflation.
• ECB's Holzmann said that Trump's tariffs lead to a slowdown in growth overall, but also create inflationary pressure."
• The latest FOMC Dot Plot anticipates only two rate cuts, down from the previously forecasted four.

EUR/USD extends its gains for the third successive day, trading around 1.0430 during the Asian hours on Monday. The upside of the pair could be attributed to the remarks from the European Central Bank (ECB) Governing Council member Robert Holzmann.

On Saturday, ECB's Holzmann said that the next interest rate cut by the central bank could be longer in coming after a recent uptick in inflation, per Reuters. He also said, "I don't see rate increases at the moment." "One probable scenario is that Trump's tariffs lead to a slowdown in growth overall, but also create inflationary pressure."

Moreover, the potential upside of the EUR/USD pair might be limited as markets continue to digest the US Federal Reserve's (Fed) hawkish pivot. The Fed cut its benchmark interest rate by a quarter point at the December meeting, and the latest Dot Plots indicated two rate cuts next year.

However, Fed Chair Jerome Powell said earlier this month that Fed officials "are going to be cautious about further cuts" after an as-expected quarter-point rate reduction. The Fed's hawkish message is likely to support the US Dollar (USD) and act as a headwind for EUR/USD in the near term.

Economists broadly anticipate that the incoming administration of President-elect Donald Trump will implement tax cuts, tariffs, and deregulation, measures expected to fuel inflation. This could prompt the US central bank to adjust its outlook for the upcoming year.