EUR/USD Drifts Near 1.1300 as Markets Brace for Fed’s Rate Decision

The EUR/USD pair is languishing around 1.1300, trapped in a listless consolidation as traders fixate on the Federal Reserve’s looming rate decision on May 6-7, 2025. With European data taking a backseat and trade policy uncertainties swirling, the pair struggles to find direction. Here’s why EUR/USD is stuck, what’s shaping its sideways grind, and what could spark its next move.

Fed Rate Call Steals the Spotlight

All eyes are on the Federal Reserve, led by Chair Jerome Powell, which is expected to hold interest rates steady at 4.25%-4.50% this week. April’s robust Nonfarm Payrolls (177,000 jobs added, beating 130,000 forecasts) and a steady 4.2% unemployment rate suggest a balanced economy, reducing the urgency for rate cuts. Yet, erratic US trade policies, including new tariffs, are stoking inflation fears, complicating the Fed’s dual mandate of controlling unemployment and prices. Powell’s press conference will be critical for hints on future policy, potentially jolting EUR/USD out of its rut.

European Data Lacks Punch

European economic releases are unlikely to stir the pot this week. Final PMI data, due midweek, is expected to confirm sluggish growth, while Wednesday’s pan-European Retail Sales figures are forecast to disappoint, dampening Euro sentiment. With no major catalysts from the Eurozone, traders are leaning on US developments, leaving EUR/USD adrift in a choppy range. The pair’s inability to break above 1.1350 or below 1.1250 underscores a market waiting for a spark.

Trade Tensions Add to the Fog

Inconsistent US trade policies are casting a shadow over the EUR/USD. Recent tariff moves and mixed signals on deals with key partners, including China, have heightened uncertainty. While these policies could drive inflation, potentially strengthening the Dollar, they also risk economic disruption, keeping investors cautious. The Euro, meanwhile, struggles to capitalize, as the European Central Bank’s anticipated June rate cut looms, further capping the pair’s upside.

What’s Next for EUR/USD

The EUR/USD’s technical outlook is stagnant, with the pair oscillating around 1.1300. Support sits at 1.1250, with resistance at 1.1350. A breakout hinges on the Fed’s tone or unexpected trade developments. If Powell signals a hawkish hold, the Dollar could firm, pushing EUR/USD toward 1.1250. Conversely, dovish hints might lift the pair to 1.1350. With next week’s Eurozone PMI and US consumer confidence data on deck, volatility looms. For now, EUR/USD’s drift is a trader’s test of patience—watch the Fed for the next cue.