In the late Asian session, the EUR/USD pair remains range-bound near the 1.0940 level, exhibiting a lack of clear direction. The market is divided regarding the future course of interest rate policy to be pursued by the Federal Reserve (Fed).
During the Asian session, S&P 500 futures experience minor losses as cautious investors observe the extended weekend in the United States. The closure of US markets on Monday is in observance of Juneteenth.
The US Dollar Index (DXY) also demonstrates a sideways performance as investors hold mixed opinions on the Fed’s forthcoming policy rate guidance. Last week, Fed Chair Jerome Powell maintained steady interest rates but provided hawkish guidance by indicating the appropriateness of two small interest rate hikes.
Based on the US economic outlook and a decrease in US consumer inflation expectations, market participants believe that the Fed may announce only one rate hike this year, as indicated by the CME Fedwatch tool.
On Friday, preliminary five-year consumer inflation expectations softened to 3%, deviating from earlier estimates and the previous release of 3.0%. This decline can be attributed to lower gasoline prices, resulting in a considerable decrease in current consumer and producer inflation levels.
Furthermore, the US labor market conditions have significantly weakened due to firms facing challenges from higher interest rates and stringent credit conditions imposed by US regional banks.
Turning to the Eurozone, the European Central Bank (ECB) has implemented another interest rate hike, bringing rates to 4%. Despite the bleak economic prospects in the Eurozone, ECB President Christine Lagarde has chosen to persist in the fight against persistent inflation and not take sole responsibility for the situation.
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