The EUR/USD pair hovers around 1.0888 as the market anticipates key events, with the European Central Bank (ECB) interest rate policy and US GDP data on the horizon. Trading just below the psychological resistance of 1.0900, the pair exhibits a subdued performance in the London session, reflecting cautious sentiment among market participants.

S&P500 futures show some gains during the European session, indicating a mild recovery in risk appetite. The US Dollar Index (DXY) consolidates around 103.30 as investors await the release of US Q4 Gross Domestic Product (GDP) data at 13:30 GMT. Expectations suggest a slower growth rate of 2.0%, marking the lowest since 2Q2022. A deceleration in economic growth could ease consumer inflation expectations, potentially increasing the likelihood of a Federal Reserve (Fed) interest rate cut in March.

Alongside the US GDP data, market focus extends to the core Personal Consumption Expenditure (PCE) price index data for December, set to be released on Friday. In the Eurozone, attention is directed towards the ECB interest rate decision at 13:15 GMT. The ECB is anticipated to maintain the main refinancing operations rate at 4.5%. ECB President Christine Lagarde’s recent comments about potential interest rate reductions from late summer, citing concerns about elevated inflation, contribute to the market’s watchfulness.

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