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Fed expected to refrain from further rate hikes

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The EURUSD pair 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 EURUSD pair inched higher to near 1.0720 during Asian trading.

According to a Reuters report, Fed Chairman 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 on Thursday. These releases will likely provide further insights into the state of the US economy.

From the Eurozone, the Euro could struggle due to a more dovish stance from the European Central Bank compared to the Fed.

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.

(Source: OANDA)