• EUR/USD lost ground as US Dollar surged after the release of solid US CPI data.
• The Euro received upward support from the improved Economic Sentiment data.
• FedWatch Tool suggests 37% and 51% probability of a 25 bps rate cut by the Fed in May and June, respectively.

The EUR/USD pair remains in a downtrend, reaching fresh three-month lows on Wednesday following the release of robust US inflation data. The higher-than-expected inflation has shifted market sentiment towards no interest rate adjustment by the Federal Reserve (Fed) in the upcoming March meeting. This has provided upward support for the US Dollar (USD) against the Euro (EUR).

The Euro experienced a moment of respite following the release of better-than-expected Economic Sentiment data from both the Eurozone and Germany on Tuesday. Investors are now eagerly awaiting preliminary Gross Domestic Product (GDP) data slated for release on Wednesday. Furthermore, market participants are keenly paying attention to a scheduled speech by Christine Lagarde, the President of the European Central Bank (ECB), on Thursday.

The US Dollar Index (DXY) rebounds from intraday losses and continues to extend gains despite downbeat US Treasury yields. Market sentiment has undergone a significant shift, with expectations for an unchanged interest rate next month soaring to near 90%, a marked difference from just a month ago. Investors are now contemplating the possibility of a rate cut by the Federal Reserve (Fed) in June.