EUR/USD advances above 1.0900 ahead of ECB policy decision

• EUR/USD continues the winning streak on the subdued US Dollar.
• The Greenback faces challenges as the Fed holds interest rates at 5.5%.
• Fed’s “dot-plot” showed a decline of 50 basis points in Interest Rate Projection for 2024.
• ECB is expected to not adjust its current interest rate stance.

EUR/USD moves on an upward trajectory that began on Monday on the back of dovish sentiment around the Federal Reserve’s (Fed) Interest Rate Decision. The Federal Reserve, in line with widespread expectations, decided to keep interest rates unchanged at 5.5% on Tuesday. The EUR/USD pair trades around 1.0910 during the Asian session on Thursday.

Additionally, the Fed’s “dot-plot” revealed a notable shift in Interest Rate Projections for 2024, indicating a decline of 50 basis points from 5.1% to 4.6%. This adjustment in the projections suggests a potentially more accommodative monetary policy stance in the future.

US Dollar Index (DXY) continues to drop on the downbeat US bond yields, trading around 102.60. The 2-year and 10-year US Treasury yields dropped to 4.34% and 3.97%, respectively, at the time of writing.

The economic sentiment in the United States (US) encounters headwinds with the release of discouraging Producer Price Index (PPI) data for November, adding pressure to the US Dollar. As reported by the US Bureau of Labor Statistics, the year-on-year growth in PPI slowed to 0.9%, missing the expected 1.0%. Similarly, the Core PPI recorded 2.0%, below the anticipated 2.2%. Market participants will focus on the upcoming release of US Retail Sales data on Thursday.

On the other side, the seasonally adjusted Industrial Production index, released by Eurostat on a monthly basis revealed that the output of the industry declined by 0.7% against the expected decline of 0.3%.

The upcoming monetary policy meeting of the European Central Bank (ECB) on Thursday is expected to maintain unchanged rates. Market attention is keenly focused on the ECB’s guidance for 2024, particularly any indications regarding the potential timing of interest rate cuts.