EURUSD falls slightly to 1.0740 as the US dollar Strengthens amid a light US Economic calendar.
The EURUSD is down marginally at 1.0740 in Wednesday’s European session. The major currency pair falls as the US Dollar climbs, with central bank officials’ comments becoming the primary market movers in the absence of top tier Economic data from the Eurozone and the United States.
Investors supported the Euro versus the US Dollar in recent trading sessions as concerns about the Federal Reserve (Fed) shifting to interest-rate decreases grew because to the US’s dismal economic data. However, the Euro is struggling to maintain its strength amid widespread predictions that the European Central Bank (ECB) will decrease interest rates before the Fed.
The ECB is anticipated to lower interest rates in June.
Financial markets expect the ECB to begin cutting interest rates at its June meeting. Price pressures in the Eurozone economy are on track to return to the 2% target, and service inflation has begun to ease after holding at 4.0% for five months in a row. A number of ECB policymakers are still confident that interest rates will fall beginning in June, assuming no surprises emerge. Furthermore, the ECB is forecast to decrease interest rates three times this year, more than the Fed, increasing the policy gap between the two central banks.
Daily Market movers: EURUSD edged down as US Dollar extends recovery.
EURUSD is under pressure as the US Dollar recovers from losses caused by the Federal Reserve’s less hawkish interest rate outlook. Than anticipated and disappointing US GDP statistics for April. The US Dollar Index (DXY). Which measures the value of the greenback against six major currencies, rises to 105.60.
Fed Chair Jerome Powell stated last week following the monetary policy meeting. That additional policy tightening is not in the cards. His remarks indicated that he continued to favor rate decreases this year. Powell did, however, recognize that progress in the disinflation process seemed to be stalled.
The US Nonfarm Payrolls (NFP) data for April revealed that fewer jobs were added in April, while the unemployment rate jumped to 3.9%. Average earnings slowed considerably. than projected, indicating a weaker inflation outlook. The Services PMI dipped below the 50.0 mark that distinguishes expansion from contraction. The service sector’s output decreased to 49.4, well short of expectations of 52.0.
The Fed’s Kashkari expects no rate reduction this year due to the strong housing market.
Contrary to Powell’s intention to remain hopeful for rate decreases, Minneapolis. Federal Reserve (Fed) Bank President Neel Kashkari said on Tuesday. That he expects interest rates to remain at present levels for the rest of the year. Kashkari’s hawkish perspective on interest rates was prompted by stalled progress. In the disinflationary process caused by the strong housing market.
The impact of Kashkari’s hardline stance on interest rates on expectations. That the Fed will start decreasing interest rates from the September meeting is expected to remain subdued because he is a non voting Member till 2026. According to the CME FedWatch tool, interest rates are expected to fall 65% from their current levels in September. The probability of the Fed reducing rates in September has risen from 53% a week ago.
