The EUR/USD pair rose to 1.0672 during the early Asian session. The recovery of this major pair is supported by renewed selling pressure in the US Dollar (USD) and a favourable risk-on environment.
Hopes of a Federal Reserve (Fed) rate cut have faded. On Tuesday, Fed Chairman Jerome Powell said that recent data did not add to the Fed’s confidence and indicates that it will take longer than expected to reach the 2% target. Powell’s assertive comments may provide some support for the US Dollar and limit EUR/USD’s near-term gains. According to the CME FedWatch Tool, investors believe that the probability that the Fed will cut interest rates in September is almost 71%.
Conversely, investors are increasing their bets that the European Central Bank (ECB) will cut interest rates in June. On Wednesday, ECB policymaker Joachim Nagel indicated that a rate cut in June is becoming increasingly probable, although some aspects of the incoming inflation data remain above expectations. Meanwhile, Bostjan Vasle, ECB chief, has suggested that the deposit rate should be reduced to 3 per cent by the end of the year from a current record high of 4 per cent if disinflation continues as anticipated. The interest rate differential has been a significant factor influencing the major pairs. The ECB’s accommodative stance is exerting downward pressure on the euro, creating a headwind for EUR/USD.
Trading recommendation: Trade buy orders when the price level reaches 1.0700
Origin: FreshForex
