- EUR/USD remained range-bound, hovering around the 1.1300 level on Monday.
- The market’s attention is keenly focused on the Federal Reserve’s upcoming interest rate decision later this week.
- European economic data is taking a backseat this week as investors primarily concentrate on expectations surrounding potential interest rate reductions.
EUR/USD trading action traced a familiar pattern, oscillating around the 1.1300 mark as the new trading week commenced. The pair has been trapped within a sideways trading range, reflecting the Euro’s struggle to establish a definitive directional bias. Market participants appear hesitant to commit to substantial positions, awaiting clearer signals from upcoming key events.
The European economic calendar offers limited catalysts this week. While final Purchasing Managers Index (PMI) figures are scheduled for release, they are generally not expected to deviate significantly from preliminary estimates, thus unlikely to trigger substantial market reactions. Furthermore, the pan-European Retail Sales data, due for release early on Wednesday, are already anticipated to fall short of market expectations. This anticipated underperformance further diminishes the potential for positive sentiment surrounding the Euro, leaving EUR/USD traders to primarily focus on the Federal Reserve’s (Fed) forthcoming monetary policy announcement.
The consensus expectation is that the Federal Reserve will maintain its current stance on interest rates, holding them steady for the time being. This decision is likely to elicit further criticism from the Trump administration, which has been actively pressuring Fed Chairman Jerome Powell to implement interest rate cuts sooner rather than later. While recent labor market data and inflation figures present a mixed picture, the persistent uncertainty surrounding trade policies emanating from the White House complicates the Fed’s decision-making process. The central bank remains committed to its dual mandate of maintaining price stability and maximizing employment, and the unpredictable nature of trade relations introduces significant risks to the economic outlook, potentially hindering the Fed’s ability to achieve its objectives. Market analysts will be closely scrutinizing the Fed’s accompanying statement for any hints regarding the future path of monetary policy, particularly in light of the ongoing trade tensions and their potential impact on economic growth. Any dovish signals from the Fed could weaken the US dollar and provide a boost to the EUR/USD pair. Conversely, a hawkish tone could strengthen the dollar and exert downward pressure on the currency pair.
