- EUR/USD appreciates on improved risk appetite after dovish remarks from Fed Chair Jerome Powell.
- Fed Chair Powell said that it would take longer than previously anticipated to bring inflation down to the 2% target.
- The Euro may struggle as the recent Eurozone inflation data have bolstered expectations for a potential rate cut by the ECB in June.
EUR/USD continues to gain ground on Thursday as the prevailing positive sentiment in the market provides support for risk-sensitive currencies like the Euro. This improved risk appetite could be attributed to dovish remarks from Federal Reserve Chairman Jerome Powell on Wednesday. Powell dismissed the likelihood of a further interest rate hike after the Fed decided to maintain interest rates at 5.25%-5.50% in May’s meeting held on Wednesday. The EUR/USD pair inches higher to near 1.0720 during the Asian trading session.
According to a Reuters report, Federal Reserve Chairman Jerome Powell said that progress on inflation has recently stalled, suggesting that it would take more time than previously anticipated to bring inflation down to the central bank’s 2% target. Powell also mentioned that if robust hiring persists and inflation remains stagnant, it would justify delaying rate cuts.
Traders are likely awaiting weekly Initial Jobless Claims, Nonfarm Productivity, and Factory Orders from the United States (US) on Thursday. These releases will likely provide further insights into the state of the United States (US) economy.
From the Eurozone, the Euro could struggle due to a more dovish stance from the European Central Bank compared to the US Federal Reserve. Recent inflation data showed that Eurozone inflation held steady in April, as expected. Additionally, the core inflation fell, strengthening bets for a potential interest rate cut by the ECB in June.
Thursday brings the final HCOB Manufacturing Purchasing Managers' Index (PMI) data, with market expectations aligned with the preliminary figures. This is a leading indicator gauging business activity in the Eurozone manufacturing sector.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
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Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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