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The EUR/USD Pair Falls as the US Dollar Recovers After Investors Assess Prospects for a Fed Rate Cut
The EUR/USD fails to sustain gains near 1.0780 as the US Dollar recovers despite strong speculation of a Fed rate cut. An improvement in labor market conditions in the United States enhances the likelihood of a rate cut by the Federal Reserve. Three rate decreases are anticipated from the ECB this year as a result of diminishing inflation in the Eurozone.
The EUR/USD pair is under selling pressure near 1.0800 during the American trading session on Friday. As investors anticipate the European Central Bank (ECB) to commence reducing its borrowing rates in June, the major currency pair experiences a decline in strength.
After the June meeting, however, ECB policymakers are divided regarding the extension of the rate-cutting cycle. Few policymakers are of the opinion that further interest rate reductions following the July meeting could reignite price pressures.
Last week, Bank of Greece Governor and ECB policymaker Yannis Stournaras told a Greek media outlet that he anticipates three rate decreases this year. He believes that a rate reduction is conceivable in July and added that an economic recovery in the first quarter increased the likelihood of three cuts rather than four. During the period from January to March, the Eurozone economy grew by 0.3%, exceeding expectations of a 0.1% expansion.
Robert Holzmann, governor of Austria's central bank and a member of the ECB Governing Council, stated on Wednesday that he sees no reason to reduce key interest rates "too quickly or too strongly," according to Reuters.
EUR/USD has been influenced this week by market sentiment in the absence of tier-1 economic data from the Eurozone and the United States. However, investors will be preoccupied with the April Consumer Price Index (CPI) data that is scheduled for release on Wednesday of the following week.
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