Euro consolidates gains, markets brace for Fed rate cuts

The EURUSD pair appreciated for the seventh consecutive day, but remains capped below Thursday’s near four-year high of 1.1745.

The pair is on track for a 2% weekly rally, buoyed by easing geopolitical fears and increasing confidence that the US Federal Reserve will cut interest rates two or even three times in the second half of the year.

President Donald Trump’s attacks on Fed Chairman Jerome Powell, and his comments suggesting an early pick of an allegedly more dovish successor, coupled with weak US economic data and voices within the central bank calling for a less restrictive policy, have boosted hopes of easing interest rates.

Data released this week adds to evidence of a US economic slowdown and points in that direction.

On Thursday, the first quarter’s US Gross Domestic Product (GDP) was revised lower, to a 0.5% contraction from the 0.2% previously estimated, while on Tuesday, the US Conference Board figures revealed a decline in Consumer Confidence, to economic growth.

In the Eurozone, markets remain driven by an optimistic wave as the fragile truce between Israel and Iran holds and keeps crude oil prices at relatively low levels.

Beyond that, investors remain hopeful that a higher infrastructure and defence plan, which is expected to be approved after the summer, will boost economic activity in the region.

Friday’s main focus is the US Personal Consumption Expenditures (PCE) Price Index, which will be observed for further clues about the Fed’s rate cut calendar.

Another moderate inflation reading would cement hopes of a rate cut, probably in September, and might add selling pressure on the US Dollar.