EURUSD

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EURUSD

The main determinant for the EUR/USD pair continues to be the divergence in monetary policy expectations between the Federal Reserve (Fed) and the European Central Bank (ECB). Markets are pricing in that the ECB will cut rates earlier than the Fed. This expectation creates a fundamental pressure on the Euro. This week, inflation and retail sales data from the U.S. will determine the short-term direction of the Dollar. Weak data could ease the Dollar, providing some relief to the pair, while strong data would increase the downward pressure on the pair. For a sustained rise in the pair, the ECB needs to become more hawkish or there must be clear signals of a slowdown in the U.S. economy.