Market Analysis

During the early Asian session on Monday, the EUR/USD pair is trading stronger around 1.0665. However, its upward movement may be capped due to comments from Federal Reserve (Fed) officials hinting at a shift towards a more hawkish stance. 

Investors will closely watch the preliminary Eurozone HCOB PMI for April on Tuesday and the final reading of the US March Personal Consumption Expenditures Price Index (PCE) on Friday.

Expectations are for the European Central Bank (ECB) to maintain rates unchanged in its June meeting. The ECB has strongly hinted at a potential interest rate cut soon unless there's a significant unexpected development. 

François Villeroy de Galhau, the governor of the Bank of France, advocated for a June rate cut to prevent excessive harm to the euro area economy from higher rates. Joachim Nagel, president of Germany’s Bundesbank, also suggested an increasing likelihood of a rate cut in June, with concerns over higher oil prices being a factor.

However, ECB Governing Council member Madis Muller cautioned against rushing into further interest rate cuts after a probable initial step in June. Moreover, ECB policymaker Robert Holzmann, known for his hawkish stance, highlighted geopolitical tensions as the primary obstacle to rate cuts this year. The reduced expectations for rate cuts are providing some support to the Euro (EUR).

Conversely, the Greenback could gain strength against its counterparts due to hawkish remarks from Federal Reserve (Fed) officials and ongoing geopolitical tensions in the Middle East. 

Chicago Fed President Austan Goolsbee mentioned on Friday that inflation progress had "stalled," and the Fed's current policy stance is appropriate. Meanwhile, Atlanta Fed President Raphael Bostic indicated that the US central bank is unlikely to cut rates until the end of the year.

Paraphrasing text from "FX Street" all rights reserved by the original author.