- EUR/USD stays on the back foot near 1.0730 as the European Union’s political uncertainty weakens the Euro’s appeal.
- The ECB refuses to commit to a specific interest-rate trajectory.
- The US Dollar’s appeal remains firm ahead of the Fed’s decision and the US CPI report.
EUR/USD is showing signs of weakness near the immediate support level of 1.0730 in Tuesday’s European session. The major currency pair is facing downward pressure as the Euro takes a bearish turn following French President Emmanuel Macron’s decision to dissolve parliament and call for a snap election. This move has raised concerns about political stability.
Macron’s decision to call for a snap election was prompted by the far-right National Rally, led by Jordan Bardella, winning a significant number of seats in the EU parliamentary elections, surpassing Macron’s Centrist alliance by a wide margin.
Additionally, cautious remarks from European Central Bank (ECB) policymakers regarding the interest rate outlook are failing to boost the Euro. There are worries among ECB policymakers that progress in inflation towards the bank’s target could stall, especially with stubborn wage growth. ECB President Christine Lagarde stated in an interview that last week’s rate cut does not commit to a consistent downward path, suggesting that rates may be held steady at times.
Meanwhile, EUR/USD is finding some temporary relief after dipping close to 1.0730 as traders shift their focus to upcoming events in the United States, particularly the release of the Consumer Price Index (CPI) data for May and the Federal Reserve’s monetary policy decision.
The Fed is expected to maintain interest rates within the range of 5.25%-5.50% for the seventh consecutive time. Investors will closely watch Fed Chair Jerome Powell’s press conference and the dot plot for insights into future rate adjustments. The likelihood of only one rate cut this year, possibly in the November or December meeting, has increased, reflecting the Fed’s cautious approach to the disinflation process.
Overall, EUR/USD is facing multiple headwinds, including political uncertainty in Europe and cautious monetary policy outlooks, contributing to its downward trajectory.
EUR/USD Price Update: Euro Weakens Amid Political and Monetary Policy Concerns
