- EUR/USD appreciates as the US Dollar struggles following the dovish remarks from Fed officials.
- San Francisco Fed President Mary Daly noted that expecting two rate cuts this year is a “reasonable” outlook.
- Traders anticipate that a US-EU trade agreement will be finalized before August 1.
EUR/USD recovers its recent losses registered in the previous day, trading around 1.1630 during the Asian hours on Friday. The pair appreciates as the US Dollar (USD) loses ground amid easing risk sentiment following the dovish remarks from Federal Reserve (Fed) officials. Moreover, Financial markets are now pricing in a September starting date for rate cuts, and Fed officials penciled in two easing moves later this year, according to Reuters.
San Francisco Fed President Mary Daly stated that two rate cuts this year are a “reasonable” outlook, while cautioning against waiting too long. Meanwhile, Fed Governor Christopher Waller said that he believes that the Fed should reduce its interest rate target at the July meeting, citing mounting economic risks. Waller added that delaying cuts runs the risk of needing more aggressive action later.
However, Fed Governor Adriana Kugler said the US central bank should hold off on cutting interest rates “for some time,” noting that the impact of Trump-era tariffs is beginning to appear in consumer prices. Kugler emphasized that maintaining a restrictive monetary policy is crucial to keeping inflation expectations anchored.
Meanwhile, traders keep their eyes on trade developments between the United States (US) and the European Union (EU), expecting that an agreement could be finalized before August 1. US President Donald Trump announced a 30% tariff on EU imports, though he expressed willingness to negotiate.
Markets widely expect the European Central Bank (ECB) to hold interest rates steady at its meeting next week. However, markets are still pricing in one additional 25 basis point rate cut later this year. Several ECB policymakers signaled mixed sentiment over rate cuts.
