22 May 2024, EUR/USD
An event to look out for today:
21:00 GMT+3. USD - Publication of the Fed meeting minutes
EURUSD:
The EUR and USD pair remains stable ahead of the publication of the minutes of the Federal Open Market Committee (FOMC) meeting held on May 1, which is scheduled for Wednesday. The pair is holding near 1.0850 during the Asian trading session.
The Federal Reserve (Fed) maintains a cautious stance on inflation and the possibility of a rate cut in 2024. Federal Reserve Bank of Boston President Susan Collins, speaking at the "Central Banking in a Post-Pandemic Financial System" event on Wednesday, emphasized that progress in adjusting interest rates will take more time and noted the importance of patience as the right policy for the Fed.
Financial markets expect the first interest rate cut to occur in September at the earliest, with two more cuts of a quarter percentage point each expected before the end of the year. According to the CME FedWatch Tool, the probability that the Fed will cut rates by 25 basis points in September rose slightly to 50.3% from 49.6% a day earlier.
As for the euro, Eurostat released trade balance data for March of €24.1 billion, up from €22.8 billion in the previous month and beating market forecasts of €19.9 billion. This is the largest trade surplus since December 2020.
Uncertainty surrounding the European Central Bank's (ECB) extension of its rate-cutting cycle beyond June has intensified, lending support to the euro. While ECB policymakers are comfortable with the idea that the central bank will start cutting three key interest rates from the June meeting, they are hesitant to commit to a further trajectory of rate cuts. Instead, they prefer to take a data-dependent approach.
Trading recommendation: Trade predominantly Buy orders from the current price level
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