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EUR/USD advances toward 1.1325 as the US Dollar comes under pressure ahead of the Fed’s May 6–7 policy meeting.
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President Trump expressed confidence in securing trade deals this week.
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The ECB is still expected to cut interest rates despite a rise in Eurozone inflation in April.
EUR/USD edges higher to near 1.1325 during Monday's European session, recovering from a three-week low of 1.1265 reached late last week. The pair gains as the US Dollar (USD) faces continued uncertainty over US-China trade relations and investor caution ahead of Wednesday's Federal Reserve (Fed) policy announcement.
The US Dollar Index (DXY), which tracks the Greenback against six major currencies, dips to near 99.80, though it remains within Friday’s trading range.
Over the weekend, President Donald Trump expressed confidence in announcing bilateral trade deals with several countries this week. However, he confirmed no recent talks with Chinese President Xi Jinping, while not ruling out ongoing discussions between officials from both nations.
Although any trade deal announcements could signal a peak in tariff concerns, the ongoing US-China standoff is likely to keep investors on edge.
The key event for the US Dollar this week is the Federal Reserve’s monetary policy meeting, scheduled for Wednesday. The Fed is widely expected to maintain interest rates at 4.25%-4.50%, and investors will focus on the policy statement and Fed Chair Jerome Powell’s press conference for clues on future rate hikes.
Stronger-than-expected Nonfarm Payrolls (NFP) data for April, coupled with rising consumer inflation expectations due to Trump’s tariff policy, may limit the Fed’s ability to cut interest rates.
Daily Digest Market Movers: EUR/USD Rises as USD Faces Pressure
- EUR/USD strengthens as the US Dollar faces selling pressure, with the Euro (EUR) trading largely flat. Traders remain increasingly confident that the European Central Bank (ECB) will reduce interest rates further at its June policy meeting, despite stronger-than-expected Eurozone Harmonized Index of Consumer Prices (HICP) data for April.
- Friday’s data showed core HICP, excluding volatile components like food, energy, alcohol, and tobacco, rising 2.7%, surpassing estimates of 2.5% and the March reading of 2.4%. Meanwhile, the headline HICP climbed 2.2% year-on-year, ahead of the expected 2.1%.
- Despite the inflationary uptick, traders are focused on the Eurozone's economic outlook, which is being impacted more by US President Trump’s protectionist policies than by the inflationary pressure. ECB Vice President Luis de Guindos expressed optimism in a recent interview, suggesting that the ECB could continue cutting rates if inflation trends favor such a move.
- In Monday’s session, EUR/USD will be influenced by the release of the final S&P Global and ISM Services Purchasing Managers' Index (PMI) data for April. The ISM Services PMI is expected to come in at 50.6, slightly lower than March’s 50.8, indicating moderate growth in the services sector.
Technical Analysis: EUR/USD Recovers Above 1.1300
EUR/USD maintains its recovery above the key 1.1300 level on Monday, bouncing back from a three-week low of 1.1265 reached on Thursday. The pair found support near the 20-day Exponential Moving Average (EMA) around 1.1260, fueling the rebound.
The 14-day Relative Strength Index (RSI) remains within the 40.00-60.00 range, suggesting that the bullish momentum has slowed for now, but the overall upside bias persists.
Looking ahead, the psychological 1.1500 level will act as significant resistance. On the downside, the 1.1214 level from September 25 serves as key support for the Euro bulls.
