Although it was a hectic week with interest rate announcements from both the US Federal Reserve (Fed) and the European Central Bank (ECB), the EUR/USD exchange rate traded within a tight range on Friday, finishing at 1.1720—just shy of last month’s peak of 1.1855.
The EUR/USD pair remained steady after the Fed and ECB revealed their interest rate decisions, maintaining rates between 3.50% and 3.75%, as anticipated.
Officials also released a somewhat cautious statement, suggesting the possibility of rate cuts if the U.S. economy experiences significant slowdowns.
They evaluated recent US GDP and inflation data too. The U.S. Bureau of Economic Analysis reported a growth rate of 2.0% in the first quarter, a considerable rise from the previous figure of 0.5%.
On inflation, a different report noted that the headline and core PCE inflation rates increased by 3.5% and 3.2%, respectively, in March, moving further away from the Fed’s 2.0% goal.
In contrast, the European Central Bank (ECB) adopted a more aggressive stance, suggesting potential interest rate increases at the upcoming June meeting. They pointed to inflation spikes linked to the conflict in Iran as part of their rationale.
Looking forward, it seems both central banks will be reacting to future remarks from ECB President Christine Lagarde. S&P Global will also be releasing the final manufacturing and services PMI figures, while the Bureau of Labor Statistics (BLS) will share the latest U.S. nonfarm payroll data.
Economists predict that the forthcoming report will indicate an addition of over 73,000 jobs in April, an increase from the previous total of 178,000. The unemployment rate is expected to sit at 4.3%.
When viewing the weekly chart, the EUR/USD pair has remained within a narrow band lately. After peaking at 1.1855 in April, it’s come down to the current level of 1.1720.
The pair has successfully surpassed both the 50-week and 100-week exponential moving averages (EMAs), and it’s developing a bullish flag pattern with a vertical line and a descending channel.
This suggests a likely bullish breakout for the currency pair as the Fed and ECB continue on divergent paths. The first key level to monitor is 1.1855, and if surpassed, it could potentially rise to 1.2000.
