Throughout this week, euro bears found support at the 1.0605 level, yet the currency pair remained entrenched in sideways trading patterns, encountering resistance below 1.0690. Despite this, the pair is poised to conclude the week with minimal change, following a 1.8% decline in the previous week.
While a somewhat weakened US Dollar offered some relief to the common currency, the overarching bearish trajectory persists. The contrasting monetary policy outlooks between the European Central Bank (ECB) and the Federal Reserve are anticipated to exert downward pressure on the pair.
Recent data reinforces the notion of a sluggish recovery in the US economy, bolstering the case for a more hawkish stance from the Fed. Earlier in the week, Chicago Fed President Austan Goolsbee reiterated concerns about stalled progress on inflation, signaling a prolonged timeframe to achieve the 2% target. Consequently, the Dollar experienced a modest uptick in response.
Conversely, ECB President Christine Lagarde hinted at potential interest rate cuts in June, placing the European Central Bank in the unprecedented position of acting preemptively ahead of the Fed. This divergence in policy actions is anticipated to keep the Euro under strain in the foreseeable future.
