Softer inflation data are causing EUR to lose upward momentum.

The fact that only 70 bps of rate cuts are priced for the ECB from Sep ’23 to Sep ’24 stands in sharp contrast with the more aggressive rate cut pace priced into the US curve. 

EUR is left as a relative G10 low yielder that is now losing the upward rate momentum that was so instrumental to its strength over the past 8 months, but without the cushion of dramatic 2024 cuts having already been priced in. This in our view leaves open the door for EUR/USD to test 1.0500 near term.