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The Euro rose above $1.08 (EUR/USD), rebounding from a recent one-week low. This comeback is due to data suggesting the European Central Bank (ECB) may deliver fewer rate hikes this year.
EURUSD – ECB Rate Hike Bet Ease on Strong Euro
Negotiated pay in the Eurozone surged 4.7% compared to a year ago in the first quarter. This increase is close to the record levels in Q3 2023, prompting inflation warnings for the ECB.
The latest PMI readings showed that private sector activity is growing the most in a year this April. New orders and employment rose faster, further boosting investor confidence.
With the positive economic indicators, investors expect only 60 basis points of ECB rate hikes this year. This reflects a significant shift in market sentiment.
Fed Maintains Hawkish Stance
In contrast, the US Federal Reserve remains hawkish. Recent FOMC meeting minutes and Fed officials’ comments suggest interest rates will stay high for the foreseeable future due to ongoing concerns about disinflation progress.
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