EUR/USD And GBP/USD: Uptrends On Shaky Ground

Welcome to the last trading week in May.

The euro was able to hold above 1.08 after a recent correction. As long as 1.08 holds, the short-term uptrend in the EUR/USD remains intact and we focus on a next leg up towards 1.0950 and 1.10. The euro’s recent uptrend is however on shaky grounds after the Federal Reserve conveyed a hawkish stance, emphasizing that the disinflation process is still slow and that high interest rates might persist due to elevated inflation pressures. The markets’ lack of conviction as to when U.S. interest rates will fall, could generally be a bearish call for the euro and pound sterling.

The only central bank which still seems to be on track to cut rates in June is the European Central Bank. Therefore, all eyes are on the ECB’s rate cut on June 6.

This week’s main focus will be on the U.S. PCE Index, due for release on Friday. A downward surprise would be bearish for the U.S. dollar.

And again, we are off to a quiet start this week as both the US and UK markets are closed on Monday. So, don’t invest too much, trade with smaller positions or stay on the sidelines for now.

 

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