EUR/USD Forecast: Expected Rise Amid Credit Rating Downgrades

• Forecasts indicate the EUR/USD will approach 1.1350, largely due to the pressure on the US dollar following recent credit rating downgrades.
• President Trump’s efforts to rally support for the tax cut bill have not swayed lawmakers.
• The Euro gains traction as Trump announces ceasefire talks regarding Russia and Ukraine.

The EUR/USD is set to climb towards 1.1350, continuing its streak on Wednesday. This rise comes as the US dollar experiences significant sales pressure amid concerns over its credit ratings. The US Dollar Index (DXY), which measures the dollar against six major currencies, did manage to recover somewhat but still fell by 0.3%, landing near 99.70.

Moody’s decision to downgrade the US’s sovereign credit rating from AA1 to AAA has sparked a financial imbalance, leading to increased interest rate obligations. The agency has suggested a potential $36 trillion increase in the existing debt, while President Trump pushes for a new tax bill ranging from $3 trillion to $5 trillion.

In Washington, Trump struggled to persuade Republican lawmakers during a meeting aimed at advancing his tax agenda. Republicans are hesitant to support the tax cut bill, particularly due to concerns over “an increase in state and local tax deduction restrictions,” as noted by Republican representative Mike Lawler, according to reports.

On the economic front, investors are looking forward to the S&P Global Purchasing Managers Index (PMI) data for May, expected to show steady growth in business activity. There’s a keen interest in whether private sector employers will opt to expand operations or rely on costly imports amid the administration’s shifts in tariff policies.

Federal Reserve officials have indicated that new economic policies introduced by Trump might diminish inflation. Fed President Albert Mu Salem emphasized prioritizing price stability if inflation expectations rise, suggesting that current monetary policy is appropriately adjusted due to the uncertain economic landscape.

Market Update: EUR/USD Strong Ahead of Ukraine Ceasefire Talks

• The strength of the EUR/USD pair is being supported by the Euro’s outperformance. It is expected to perform well against most major currencies except for the Japanese Yen as the potential for a ceasefire in Ukraine offers optimism. Trump confirmed that negotiations for a ceasefire will soon commence.
• A ceasefire between Russia and Ukraine would positively impact the Euro by easing supply chain disruptions in Europe.
• In terms of monetary policy, traders are anticipating interest rate cuts from the European Central Bank (ECB) during its meeting in June, with many officials hinting that inflation could soon align with the ECB’s 2% target.
• Mario Centeno, the governor of the Bank of Portugal and an ECB council member, suggested that the ECB might need to reduce rates below the 1.5%-2% neutral level to avoid inflation falling under the target.
• This week, a forecast report from the European Union’s executive body indicated that inflation should reach the 2% target by mid-year, projecting an average price pressure of 1.7% for 2026.
• Investors are also awaiting the HCOB PMI data for the Eurozone, set for release on Thursday, with initial estimates suggesting improved growth in overall business activity.

Technical Analysis: EUR/USD Maintains Key Level at 1.1300

The EUR/USD is expected to rise near 1.1350, marking its highest position in two weeks. The recent outlook is bullish, particularly as the pair maintains an exponential moving average (EMA) over the past 20 days.

The relative strength index (RSI) indicates fluctuation within the 40.00-60.00 range, hinting at uncertainty among traders.

The resistance level sits at the April 28th high of 1.1425, while a key support level is around 1.1000.