- EUR/USD posts modest gains near 1.0672 on the softer USD on Thursday.
- Fed’s Powell said the central bank might take longer than expected to achieve the 2% target.
- ECB policymaker said a rate cut looks increasingly likely in its June meeting.
The EUR/USD pair edges higher to 1.0672 on Thursday during the early Asian session. The recovery of that major pair is bolstered by renewed selling pressure in the US Dollar (USD) and a risk-friendly environment. Investors will monitor the usual weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, the CB Leading Index, and Existing Home Sales, due later on Thursday.
The Federal Reserve’s (Fed) rate cut hopes were faded. Fed Chairman Jerome Powell commented on Tuesday that the recent data have clearly not given Fed greater confidence and indicate that it’s likely to take longer than expected to achieve the central bank’s 2% target. The hawkish comments from the Fed’s Powell might provide some support to the Greenback and cap the upside of the EUR/USD in the near term. Investors see a nearly 71% chance that the Fed will cut interest rates in September, according to the CME FedWatch Tool.
On the other hand, investors increase their bets that the European Central Bank (ECB) will cut the interest rate in June. The ECB policymaker Joachim Nagel said on Wednesday that a rate cut looks increasingly likely for June, but certain parts of the incoming inflation data still look higher than desired. Meanwhile, ECB policymaker Bostjan Vasle said that the deposit rate should be lower to 3% by the end of the year from a record high of 4% currently if disinflation continues as expected. Interest rate differentials have been a primary driver of the major pair. The dovish stance from the ECB drags the Euro (EUR) lower and creates a headwind for the EUR/USD pair.
