EUR/USD weakens to near 1.0550 on ECB rate cut bets

• EUR/USD loses traction to around 1.0550 in Monday’s Asian session.
• Markets see a potential December rate cut by the Fed. 
• The ECB is anticipated to cut another 25 bps at its December meeting on Thursday.

The EUR/USD pair trades with a mild negative bias near 1.0550 on Monday during the Asian trading hours. Investors will closely monitor the US Consumer Price Index (CPI) inflation report for November, which is due on Wednesday. On Thursday, the European Central Bank (ECB) interest rate decision will take center stage. Investors will be looking for clues about what comes next.

The expectation of a quarter-point rate cut by the Federal Reserve (Fed) on December 18 grew last week after the employment report showed strong job creation, but not at a pace that would necessarily deter Fed officials from lowering rates to between 4.25 and 4.5% from their current range of 4.5 to 4.75%. 

With hopes high for a US interest rate cut later this month, inflation data on Wednesday could serve as the one remaining potential stumbling block to a third successive rate cut from the Fed. The annual consumer price inflation is expected to rise to 2.7% YoY in November from 2.6% in October. Core inflation, which excludes volatile food and energy prices, is projected to be steady at 3.3% YoY in November. 

The European Central Bank (ECB) is expected to deliver its fourth interest rate cut of the year at its final policy meeting of 2024 on Thursday. Analysts expect the ECB to stick to its data-dependent guidance by reiterating that it “is not pre-committing to a particular rate path.” However, the ECB President Lagarde’s press conference could offer some hints about the interest rate outlook. Any dovish remarks from ECB policymakers could weigh on the Euro (EUR) against the US Dollar.