In quite a bearish start to the week, the Greenback saw its recent upside momentum run out of some steam, prompting the USD Index (DXY) to recede to the low 104.00s despite the move higher in US yields across different time frames.
EUR/USD started the week with decent gains. The selling bias in the Dollar helped spot regain the upside. Markets’ attention should remain on the US docket. In quite a bearish start to the week, the Greenback saw its recent upside momentum run out of some steam, prompting the USD Index to recede to the low 104.00s despite the move higher in US yields across different time frames.
event revealed the Federal Reserve's plan to maintain interest rates until inflation reaches the 2% target. The Fed foresees one rate cut in 2025 and expects a median Fed funds rate of 3.1% by the end of 2026, up from the previous estimate of 2.9%. Market participants, however, anticipate three interest rate cuts by the Fed this year, with the first cut possibly occurring in June. According to the FedWatch Tool provided by CME Group, the probability of a rate cut in June remained around 63%.
Governor L. Cook warned of premature cuts solidifying inflationary pressures and advocated for gradual policy easing to achieve sustainable inflation around 2% while safeguarding a robust labour market. In a broader macroeconomic context, both the Fed and the European Central Bank are expected to initiate their easing cycles, potentially beginning in June. However, the pace of subsequent interest rate cuts may differ, leading to potentially varying strategies between the two central banks.
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