- EUR/USD rose as risk appetite improved following dovish comments from Fed Chair Jerome Powell.
- Federal Reserve Chairman Jerome Powell said it will take longer than previously expected to bring inflation down to its 2% target.
- The euro could struggle as recent eurozone inflation figures raise hopes that the ECB could cut interest rates in June.
EUR/USD continued to rise on Thursday as positive market sentiment supported risk-sensitive currencies like the euro. This improvement in risk appetite can be attributed to dovish comments from Federal Reserve Chairman Jerome Powell on Wednesday. Chairman Powell ruled out further rate hikes after the Fed decided to keep interest rates between 5.25% and 5.50% at its May meeting on Wednesday. EUR/USD inched closer to 1.0720 during Asian trading hours.
Federal Reserve Chairman Jerome Powell said progress on inflation had stalled recently, adding that it was too late to bring inflation down to the central bank’s 2% target, according to a Reuters report. He suggested that it would take more time. Powell also said that if employment continues to be strong and inflation remains stagnant, delaying the rate cut would be justified.
Traders are likely waiting for weekly new jobless claims, non-farm productivity numbers and factory orders to be released from the US on Thursday. These releases may provide further insight into the current state of the U.S. economy.
From the perspective of the eurozone, the euro could suffer due to the European Central Bank’s more dovish stance compared to the US Federal Reserve. Eurozone inflation remained stable in April, as expected, according to recent inflation data. Furthermore, core inflation has fallen, increasing expectations that the ECB will cut interest rates in June.
The final HCOB Manufacturing Purchasing Managers Index (PMI) data was released on Thursday, and market expectations are in line with the preliminary figures. It is a leading indicator of business activity in the euro area manufacturing sector.
