The EUR/USD currency pair is facing selling pressure for the second consecutive day, trading in the mid-1.1800s range during a quiet Asian session. Market participants are exercising caution as the broader economic backdrop raises concerns for traders looking to capitalize on potential declines in the pair.
The US Dollar Index (DXY), which measures the value of the dollar against a basket of currencies, has managed to hold onto modest gains from the previous day, remaining steady above the 97.00 threshold. This steady rise in the dollar is causing some downward momentum in the EUR/USD pair. Contributing to the euro’s struggles is a growing consensus regarding a potential interest rate cut by the European Central Bank (ECB), fueled by a decrease in Eurozone inflation to its lowest level since September 2024.
While the USD shows some strength, its upside potential appears to be somewhat restrained by expectations of a dovish stance from the US Federal Reserve. Recent inflation figures from the United States have led to increased speculation that the central bank may lower interest rates in June. This scenario also raises concerns about the Fed’s independence, which may deter aggressive bullish strategies in the dollar and, consequently, help cushion the EUR/USD pair.
Traders seem to be taking a wait-and-see approach, looking for further guidance on the Federal Reserve’s interest rate trajectory before committing to new positions. The upcoming minutes from the Federal Open Market Committee (FOMC) meeting on Wednesday are expected to be closely watched for insights into the Fed’s views on interest rates. Additionally, key economic indicators slated for release later in the week—including the Advance US Q4 GDP report, the Personal Consumption Expenditure (PCE) Price Index, and global flash PMIs—are anticipated to provide fresh momentum for market movements.
In terms of performance this week, the US Dollar has shown strength against several major currencies, with the most notable gains against the Japanese Yen. In a recent breakdown of percentage changes, the USD demonstrated a range of movements against various currencies, including a 0.23% increase against the euro and a 0.34% rise against the Japanese Yen. This highlights the dollar’s relative strength in the foreign exchange market as traders navigate a complex economic landscape characterized by varying expectations regarding monetary policy.
