Euro down as fed keeps hawkish stance

EUR/USD recovers from 1.0830 in Friday’s American session as market sentiment over upcoming interest-rate cuts improves despite Federal Reserve (Fed) policymakers supporting keeping the monetary policy stance restrictive for a longer period. Earlier, these comments helped the US Dollar lick its wounds after the sharp fall induced by the decline in the United States (US) inflation in April, as shown by the Consumer Price Index (CPI) report released on Wednesday. But the US Dollar has now fallen back on firm speculation that the Fed will start reducing interest rates from the September meeting. 

The corrective move in the major currency pair seems purely the outcome of the US Dollar’s recovery. However, the appeal for the Euro also remains upbeat as European Central Bank (ECB) policymakers are also casting doubts over the need to extend the rate-cut cycle immediately after a widely anticipated June rate cut.  

In the early London session, Board member Isabel Schnabel said the path beyond the June rate cut is uncertain. Schnabel added recent inflation data suggested that the last mile in the disinflation process is the most difficult, adding that she remained cautious about upside risks to inflation that could arise from premature rate cuts.