EUR/USD Fluctuates Near 1.0860 Prior to the Fed's Powell Speech

The EUR/USD pair retreats to approximately 1.0860 during Friday's early Asian trading hours. A strengthening US Dollar (USD) and rising US Treasury bond yields support the decline in the major pair. Traders await Friday's German IFO Business Climate report in advance of Fed Chair Powell's address.

Wednesday, the US Federal Reserve maintained its benchmark overnight borrowing rate between 5.25 and 5.5 percent. Although the timetable of interest rate reduction was not specified, Fed Chairman Jerome Powell anticipated implementing one by the end of the year. The CME FedWatch Tool indicates that futures markets have priced in an 80% chance that the Federal Reserve will initiate rate cuts at its June meeting.

With regard to the data, the US S&P Global Composite PMI increased from 52.5 in February to 52.2 in March. Furthermore, in March, the Manufacturing PMI increased from 52.2 in February to 52.5, surpassing the market's anticipation of 51.7. In March, the Services PMI decreased from the previous reading of 52.3 to 51.7, which was weaker than the consensus estimate of 52.0.

In contrast, the most recent Purchasing Managers Index survey conducted by the HCOB on Thursday unveiled that the Eurozone Manufacturing PMI for March registered at 45.7, down from 46.5 previously, which was below the consensus estimate of 47.0. In contrast, the Services PMI increased from 50.2 in February to 51.1 in March, exceeding expectations of 50.5. In March, the Eurozone PMI Composite increased to 49.9 from the anticipated 49.7 and February's 46.3.

Traders will now focus on the German IFO Business Climate and the speeches delivered by Fed Chair Powell and Barr on Friday. The February German Retail Sales and the fourth-quarter (Q4) US Gross Domestic Product (GDP) will be released the following week. These events may provide the EUR/USD pair with a distinct trajectory.