EUR/USD maintains its position near 1.0850 post recent losses, focus shifts to US PCE

• EUR/USD could mark further losses due to a dovish sentiment surrounding the ECB.
• Market participants bet on a first 50 bps rate cut from the ECB by June.
• US Treasury Secretary Janet Yellen emphasized that the recent GDP report does not put any threats on a ‘soft landing’ scenario for the US economy.

EUR/USD holds its position near 1.0850 during the Asian hours on Friday following a backslide in the previous session, which could be attributed to the European Central Bank’s (ECB) interest rate decision. Additionally, the better-than-expected US Gross Domestic Product (GDP) data helped the US Dollar (USD) to mark profits on Thursday, which in turn, acts as a headwind for the EUR/USD pair.

The European Central Bank (ECB) maintained its interest rates for a third consecutive meeting. ECB President Christine Lagarde indicated the possibility of a rate cut in the summer in the monetary policy statement. Market participants anticipate a first 50 basis point cut from the ECB by June. Rate swaps are currently pricing in a total of 140 basis points in rate cuts from the ECB by the end of 2024.

The US Dollar Index (DXY) could seek to build on recent gains, fueled by the stronger-than-expected US Gross Domestic Product (GDP) figures. The Q4 GDP report printed a reading of 3.3%, surpassing the previous figure of 4.9% and exceeding the market consensus of 2.0%.

US Treasury Secretary Janet Louise Yellen has expressed that the strong Q4 GDP data is a result of vigorous and healthy spending, coupled with improvements in productivity. She emphasizes that the GDP report does not indicate any threats to the potential of a ‘soft landing’ scenario for the US economy. Furthermore, on Friday, the Personal Consumption Expenditures (PCE) Price Index data is expected to provide insights into the monthly changes in both Personal Spending and Personal Income, influencing market sentiment further.