• The EUR/USD pair ends its two-day losing streak ahead of Wednesday’s FOMC Minutes.
• Susan Collins of the Fed said that it will take longer to change interest rates.
• The Euro is being supported by the possibility that the ECB may prolong its cycle of rate cuts.

The Federal Reserve (Fed) continues to take a cautious approach to inflation and the likelihood of rate reductions in 2024. Speaking on Wednesday at the “Central Banking in the Post-Pandemic Financial System” event, President Susan Collins of the Federal Reserve Bank of Boston underlined that patience is the best course of action for the Fed and that progress towards interest rate adjustment will take longer than anticipated.

The first interest rate cut is predicted by the financial markets to happen in September at the latest. Two more rate reductions of one-quarter of a percentage point each are anticipated before the year ends. The likelihood that the Federal Reserve would lower interest rates by 25 basis points in September has somewhat improved to 50.3% from 49.6% just one day earlier, per the CME FedWatch Tool.

 

Regarding the Euro, Eurostat reported a Trade Balance of €24.1 billion in March, which was higher than the €22.8 billion reported in the previous month and higher than the €19.9 billion projected by the market. Since December 2020, this was the biggest trade surplus recorded.

The Euro has been supported by the growing uncertainty about the European Central Bank’s (ECB) decision to continue the rate-cutting cycle past June. Though they are reluctant to commit to any further rate trajectory, ECB officials are comfortable with the prospect of the central bank starting to cut its three key interest rates starting from the June meeting. Rather, they would rather continue using a data-dependent strategy.