The EUR/USD pair extended its downward trajectory, hovering around 1.0640 in the early Asian session today, following a retreat from weekly peaks of 1.0690 reached on Friday. The recent strengthening of the US Dollar (USD) was bolstered by hawkish remarks from Federal Reserve (Fed) officials. Notably, Chicago Fed Austan Goolsbee is slated to address later in the day, potentially impacting market sentiment.
On Thursday, the US Department of Labor reported a rise in the number of new claims for unemployment benefits by 212,000 for the week ending April 13, slightly below the market consensus of 215,000. Despite this uptick, the labor market resilience suggests a delay in potential interest rate cuts by the US Fed until September, as investors gauge the economic landscape.
Fed Chair Jerome Powell’s commentary on Tuesday emphasized the need for a prolonged restrictive monetary policy, citing unexpected inflationary pressures in the first quarter. Similarly, Atlanta Fed President Raphael Bostic highlighted expectations of a slower return to the 2% inflation target, signaling a patient approach towards rate adjustments, with potential cuts by year-end. New York Fed President John Williams echoed sentiments of policy patience, indicating satisfaction with the current monetary stance. These remarks, coupled with robust US economic indicators, continue to buoy the USD, exerting downward pressure on the EUR/USD pair.
Conversely, the European Central Bank (ECB) hinted at a potential interest rate cut as early as June. ECB Vice President Luis de Guindos affirmed the readiness of the central bank to adjust its monetary policy stance based on evolving data trends. François Villeroy de Galhau, another ECB policymaker, stressed the importance of preemptive rate cuts in June to avoid lagging behind inflation.
Echoing these sentiments, ECB policymaker Joachim Nagel suggested increasing likelihood of a June rate cut, despite certain inflation metrics surpassing expectations. Speculation surrounding an earlier ECB rate cut compared to the US Fed has contributed to Euro (EUR) selling pressure, constraining the upside potential of the EUR/USD pair in the near term.
