EUR/USD, EUR/GBP Analysis

• Fed-ECB policy divergence on the cards, EUR/USD attempts to halt the recent decline
• EUR/GBP continues to trade within familiar range
• Scheduled risk events overshadowed by geopolitical uncertainty
• Elevate your trading skills and gain a competitive edge. Get your hands on the euro Q2 outlook today for exclusive insights into key market catalysts that should be on every trader's radar:

Fed-ECB Policy Divergence on the Cards

Recent developments have seen the Fed delay the start of its rate-cutting cycle due to hotter-than-expected inflation data and a resilient economy, including a robust labor market. This has led to a prolonged period of higher interest rates in the US, which has put pressure on the Euro.

In contrast, ECB officials have expressed a preference for a rate cut in June as the governing council gears up to move before the Fed. Traditionally major central banks look the Fed for that first move and subsequently follow shortly after. The growing calls for a rate cut in the eurozone are materializing at the right time as the continent grapples with stagnating growth and inflation that has headed lower than initially anticipated. Just this morning EU inflation for March was confirmed to be falling at an encouraging pace.

During the April meeting, the ECB refrained from pre-committing to any specific rate path, indicating a more data-dependent approach. This cautious stance has allowed the central bank to maintain flexibility in its decision-making process, taking into account the evolving economic landscape and geopolitical uncertainty.

Traders and investors will be closely monitoring upcoming economic data releases, particularly those related to inflation and growth in the US and the eurozone, as well as any further comments from ECB and Fed officials. If the data continues to support the case for a rate cut and the ECB follows through on these expectations, the Euro could be poised for gains in the near term.

EUR/USD Attempts to Halt the Recent Decline

EUR/ USD attempts to halt the recent US CPI-inspired sell-off. The pair has come under pressure after Fed officials signaled a reluctance to cut the Fed funds rate in the face of stubborn inflation.

Nevertheless, the pair attempts to arrest the recent decline, recovering from oversold territory. The shorter-term pullback at extreme levels is not uncommon but the longer-term outlook suggests a further decline is possible. EUR/USD bears will be watching the 23.6% Fibonacci retracement level (corresponding to the broad 2023 decline.

EUR/USD Daily Chart