EUR/USD tumbles below 1.0550 as traders await ECB’s Lagarde speech, US PMI data

• EUR/USD loses momentum to near 1.0530 in Monday’s Asian session. 

• Eurozone's inflation rose to 2.3% YoY in November. 

• The cautious stance of the Fed provides some support to the USD and acts as a headwind for EUR/USD. 

The EUR/USD pair faces some selling pressure to around 1.0530 amid the firmer US Dollar (USD) during the early Asian trading hours on Monday. Investors will closely monitor the speech by the European Central Bank’s (ECB) President Christine Lagarde and the release of the US ISM Manufacturing Purchasing Managers' Index (PMI), which is due later on Monday. 

Inflation in the Eurozone, as measured by the Harmonized Index of Consumer Prices (HICP), rose to 2.3% YoY in November from 2.0% in October, in line with market expectations. This figure overreached the ECB 2.0% target. Meanwhile, the Core HICP climbed by 2.8% YoY in November, compared to 2.7% in the previous reading, which was also in line with expectations. 

Market participants have fully priced in a 25 basis points (bps) rate cut from the ECB in December, which would signify the bank’s fourth rate reduction this year. However, expectations of a substantial 50 bps reduction have been dwindling since last month, with slight enhancements in the Eurozone’s tepid growth forecast. The expectation that the ECB will cut interest rates at their December meeting exerts some selling pressure on the Euro (EUR). 

On the other hand, the cautious stance of the US Federal Reserve (Fed) might continue to underpin the Greenback. Fed Chair Jerome Powell highlighted that “the economy is not sending any signals that we need to be in a hurry to lower rates. Powell added that “the strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” The markets now see nearly a 65.4% odd that the Fed will cut rates by a quarter point in December, according to the CME FedWatch Tool.