The EUR/USD pair trades close to more than a five-month low near the round-level support of 1.0600 in the European session on Tuesday.
EUR/USD drops to 1.0600 as the Fed is expected to pivot to rate cuts after the ECB . Eurozone’s weak economic outlook and cooling inflation fuel ECB rate cut bets. Fed policymakers emphasize keeping interest rates higher until they aresure about inflation returning sustainably to 2%. The major currency pair is vulnerable to furtherdownside as investors see the policy divergence between the Fed eral Reserve and the European Central Bank extending further.
Meanwhile, traders have priced out expectations for Federal Reserve rate cuts in the June and July policy meetings as core United States inflation remains stronger than expected in three months this year. This has strengthened the argument that the Fed should keep interest rates restrictive for a longer period. Currently, investors expect that the Fed will start reducing interest rates from the September meeting.
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