- The ECB’s Francois Villeroy confirmed that the central bank will implement its first rate cut next week.
- Philip Lane said the ECB’s rate cut would depend on core inflation and demand.
- Data on Monday revealed that German business morale stagnated in May.
EUR/USD outlook is bullish as Euro rises despite tough ECB comments. Markets expect the central bank to implement its first interest rate cut next week. However, the weaker dollar prevented the euro from falling. The dollar weakened as investors awaited more data on US inflation.
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Policymakers of the European Central Bank remained convinced of the beginning of the cycle of interest rate cuts by the central bank. The ECB’s Francois Villeroy confirmed that the central bank will implement its first rate cut next week. Meanwhile, Philip Lane said the rate cut would depend on core inflation and demand. Therefore, there is no doubt about the rate reduction. The only uncertainty is about the pace of the cuts and what will happen after the June meeting.
Policymakers cannot ignore the fact that the Fed’s monetary policy will significantly affect the actions of other central banks. Therefore, while most major central banks are ready to start cutting rates before the Fed, they will be cautious after several cuts.
Elsewhere, data on Monday revealed that German business morale stagnated in May and missed forecasts. Consequently, the economy may recover at a slower pace than expected.
Meanwhile, in the US, investors await the report on the core PCE price index, which will provide further insight into Fed policy. Economists expect the numbers to remain stable on a monthly basis. Any surprise could change the prospects for a rate cut. At this point, markets fully expect the first cut in December. Meanwhile, there is a 60% chance the Fed will cut rates in September.
EUR/USD key events today
- US CB Consumer Confidence
EUR/USD Technical Outlook: Bulls are back with eyes on 1.0900
On the technical side, the EUR/USD price went from bearish to bullish after failing to sustain a move below the 30-SMA. Initially, the bears took control when the price broke out of its bullish channel. However, they failed to break below the key 1.0800 level, allowing the bulls to retake control.
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At the moment, the price is above the 30-SMA and the RSI is above 50, which is bullish territory. Therefore, the price is likely to rise to retest the resistance level at 1.0900. However, to confirm the continuation of the previous uptrend, the bulls must break above 1.0900.
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