The EUR/USD pair has attracted fresh buyers on Wednesday, benefiting from a modest downtick in the US Dollar. The pair has built on an overnight bounce from the 1.0860-1.0855 region, trading just below the 1.0900 mark during the Asian session. This level remains within striking distance of the highest level since March 21, reached on Tuesday.
Market sentiment has been influenced by Fed rate cut expectations, keeping US Treasury bond yields depressed. This has ultimately undermined the USD, providing support to the EUR/USD pair. The softer US macro data indicates a cooling economy and reinforces the belief in an imminent interest rate cut by the Federal Reserve later this year.
Traders are expected to remain cautious ahead of the European Central Bank (ECB) meeting on Thursday. Policymakers have signaled a likely interest rate cut of 25 basis points at the June 6 meeting. This would be the first cut since March 2016 and would be accompanied by the latest economic projections. Analysts will closely monitor ECB President Christine Lagarde’s comments for hints on future rate cuts, particularly in light of a rise in Eurozone inflation in May.
Following the ECB meeting, market attention will shift to the release of the US Nonfarm Payrolls (NFP) report on Friday. This closely-watched employment data could impact expectations regarding the Fed’s next policy move and the direction of the USD. The outcome of the NFP report will likely play a crucial role in determining the movement of the EUR/USD pair in the near future.
The EUR/USD pair continues to show strength as it attracts buyers amidst a weakening US Dollar. The upcoming ECB meeting and US employment data are expected to be key drivers of market sentiment and could lead to increased volatility in the pair. Traders should closely monitor these events for trading opportunities in the currency markets.