• Fed uncertain as timing of rate cuts
• German CPI rises, but core rate falls

The euro has edged higher on Thursday. In the European session, EUR/USD is trading at 1.0950, up 0.26%.

Fed unclear on rate cut timing

The December policy meeting was highly significant as the Fed made a major pivot. After months of sticking to its script of ‘higher for longer’, the Fed threw in the towel and signalled that it expected to cut rates three times in 2024. This was a major shift in policy and sent the US dollar lower and the equity markets higher in the aftermath of the meeting.

There was a great deal of anticipation ahead of the FOMC minutes release on Wednesday, with investors hoping to learn more about the Fed’s rate path. In the end, the minutes didn’t provide any such details, with Fed members noting that there was an “unusually elevated degree of uncertainty” about the rate path, which would depend on economic conditions. Members noted that progress had been made in the battle against inflation but noted that core services continued to move higher. The US dollar has had a muted reaction to the minutes today, while US stock exchanges closed lower on Wednesday as investors were disappointed that the timing of rate cuts remains up in the air.

German CPI rises to 3.7%, core CPI falls to 3.5%

Inflation has been falling in Germany, the eurozone’s largest economy, but that trend reversed in December. Germany’s CPI jumped to 3.7%, up from 3.2% in November and matching the consensus estimate of 3.7%. The main driver behind the upswing was a rise in energy prices. On a monthly basis, CPI rose 0.1%, compared to -0.4% in November. Core CPI, which excludes food and energy, fell to 3.5%, down from 3.7% and its lowest level since July 2022. This is an encouraging sign for the ECB, as Core CPI is considered a more reliable gauge of inflation trend than headline CPI.

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EUR/USD Technical

• EUR/USD is testing resistance at 1.0927. Above, there is resistance at 1.0960
• 1.0888 and 1.0855 are the next support lines

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