The EUR/USD pair has rebounded to 1.1460, yet it is still approximately 0.9% lower for the week. The US Dollar is retracing from its recent peaks amid low-volume trading conditions. Rising expectations regarding Federal Reserve interest rate increases are expected to constrain declines in the value of the US Dollar. The Euro trades practically flat against the US Dollar on Friday, changing hands at 1.1460 after bouncing up from three-month lows at 1.1420. The pair, however, remains on track for a 0.9% weekly decline, as increasing expectations of Federal Reserve rate hikes have propelled the US Dollar upward across the board.
US Dollar bulls are pausing for a moment during the Juneteenth bank holiday in the United States. The Euro appears to be struggling to recover from its recent lows, even in light of investors’ optimism regarding the US-Iran peace agreement and the decrease in oil prices. The market perceives that declining energy prices will alleviate the pressure on the European Central Bank to continue increasing rates, whereas, in the United States, the Federal Reserve’s hawkish position has bolstered support for the Greenback. The Fed left interest rates on hold earlier this week, with the interest rate projections indicating that nearly half of the committee members foresee at least one rate hike this year.
Beyond that, the new Chairman, Kevin Warsh, reaffirmed his dedication to achieving the inflation target, thereby increasing expectations for potential monetary tightening later this year. In the macroeconomic landscape, US data has persistently demonstrated resilience amid the ongoing conflict in the Middle East. Data released earlier this week indicated that US Retail Sales exceeded expectations in May, while the Philadelphia Fed Manufacturing Survey underscored a robust recovery in June.
In the Eurozone, the German Producer Prices Index recorded a 2.2% annual growth in May, surpassing the prior month’s 1.7% year-on-year increase, yet falling short of the anticipated 2.5% reading. The monthly increase decelerated to 0.3% from 1.2% in April, indicating that the effects of the energy shock may be diminishing.