The Euro (EUR) experienced a dramatic recovery during Wednesday’s US trading session, gaining nearly 60 pips following the release of disappointing US services sector data. This eased concerns about a more aggressive Federal Reserve (Fed) stance.

US Services PMI Misses Expectations, Easing Fed Fears

The Institute for Supply Management (ISM) revealed a slowdown in the US services sector for March, with the PMI falling to 51.4 from 52.6 the previous month. This missed expectations for a slight rise to 52.7. Furthermore, the Prices Paid sub-index declined significantly to 53.4 from February’s 58.6 and January’s 64, highlighting a disinflationary trend within the sector.

The weak PMI figures partially offset a strong ADP report that signaled a resilient US labor market ahead of Friday’s crucial Nonfarm Payrolls release. Despite comments from Atlanta Fed President Bostic and Fed Chair Powell downplaying expectations of immediate rate cuts, the pair’s momentum remained largely unaffected.

Eurozone CPI Confirms Soft Inflation, Potential ECB Rate Cuts

During the European session, Eurozone CPI data reinforced the subdued inflation readings initially observed in Germany on Tuesday. Core inflation declined below 3% YoY, while the headline CPI eased to 2.4%, below the market’s 2.6% forecast. These softer figures add weight to the case for future interest rate cuts by the European Central Bank (ECB), though the immediate impact on the Euro was limited.