EUR/USD slides amid uncertainty over ECB rate cut

Due to several tailwinds, the EUR/USD pair had earlier stayed stable near 1.0900 throughout Monday’s New York session. However, as of this writing, it had dropped to 1.0859. Because of the increased risk appetite of investors, the major currency pair is still in bullish zone. Although policymakers remain split on the rate-cutting action at the July meeting, the ECB is expected to begin reducing interest rates at the June meeting. A series of dramatic rate cuts, according to some officials, might reinvigorate price pressures and counteract the progress made thus far in reducing inflation.

The route beyond June is far more unknown, according to ECB board member Isabel Schnabel, although a rate drop in June may be justified based on incoming data. Because of the extreme uncertainty, she is unable to precommit to any one rate path.

Regarding the economy, investors will turn their attention to the preliminary May Purchasing Managers Index (PMI) data from the US and the Eurozone, both of which are scheduled for release on Thursday. The Federal Open Market Committee (FOMC) minutes for the May meeting, which will offer a thorough justification for interest rates being constant and policymakers’ perspectives on the interest rate outlook, are anticipated to divert investors’ attention and cause the shared currency pair to remain silent.

The decline in price pressures has provided some relief that progress in the disinflation process has not stalled, but Fed policymakers remain leaned towards a restrictive policy stance for a longer period to build confidence that inflation will sustainably return to the desired rate of 2%. New York Fed Bank President John Williams said the monetary policy is restrictive and is in a good place, and he doesn’t see any economic indicator suggesting the need to change the stance of monetary policy now.