The Euro to US Dollar exchange rate experiences a downward trend, reaching approximately 1.11500 during Friday’s North American trading hours. This can be attributed to the US Dollar’s recovery after initially losing ground, following the release of preliminary data on US Consumer Sentiment and Inflation Expectations for May.
The US Dollar Index, which measures the USD against six major currencies, rises above 101.00.
Preliminary data shows that one-year Consumer Inflation Expectations have risen to 7.3% from the previous release of 6.5%. This data could potentially discourage the Federal Reserve (Fed) from reducing current interest rates. Fed officials have already expressed their preference for maintaining steady interest rates, citing concerns that the current tariffs may lead to inflation. On Monday, the US and China reached a trade agreement to decrease tariffs by 115% for 90 days.
In a recent statement, Chicago Fed Bank President Austan Goolsbee noted, “Tariffs are still three to five times higher than they were before, which will have a stagflationary effect on the economy, slowing growth and raising prices.”
According to the CME FedWatch tool, the likelihood of the Fed keeping interest rates steady at 4.25%-4.50% during their June and July meetings is 91.8% and 65.1%, respectively.
Meanwhile, the Consumer Sentiment Index (CSI) unexpectedly drops to 50.8 from 52.2 in April, the lowest level since June 2022. Market experts had predicted the data to show an increase to 53.4. This is the fifth consecutive month of decline in the CSI.
On Friday, EUR/USD drops to around 1.1150. The pair’s short-term outlook remains uncertain, with the 20-day Exponential Moving Average (EMA) acting as a significant obstacle at 1.1210.
The 14-period Relative Strength Index (RSI) bounces back to 50.00 after falling close to the 40.00 mark, signals indecisiveness among investors.
Looking ahead, the April 28 high of 1.1425 will serve as a major resistance for the pair. On the other hand, the March 18 high of 1.0955 will be a crucial support for Euro bulls.