EUR/USD consolidates around 1.0940 due to mixed responses about Fed’s rate guidance

• EUR/USD is showing non-directional performance as the street is divided about further interest rate roadmap by the Fed.
• S&P500 futures are showing some losses as investors are cautious due to an extended weekend in the US.
• ECB hiked interest rates by 25 bps to 4% despite severe challenges to Eurozone’s growth.  

The EUR/USD pair is oscillating in a narrow range around 1.0940 in the late Asian session. The major currency pair is demonstrating a non-directional performance as the street is divided about the further roadmap of interest rate policy to be attempted by the Federal Reserve (Fed).

S&P500 futures are showing some losses in the Asian session as investors are cautious due to the extended weekend in the United States. The US markets are closed on Monday on account of Juneteenth.

The US Dollar Index (DXY) is also showing a sideways performance as investors are mixed about further policy rate guidance by the Fed. Last week, Fed chair Jerome Powell allowed interest rates to remain steady but delivered hawkish guidance citing that two small interest rate hikes are appropriate

Considering the US economic outlook and softening US consumer inflation expectations, the street believes that the Fed might announce only one rate hike this year, according to the CME Fedwatch tool. On Friday, preliminary five-year consumer inflation expectations were softened to 3% vs. the estimates and the prior release of 3.0%. While current consumer and producer inflation has softened sharply due to lower gasoline prices.

Apart from that, US labor market conditions have softened sharply as firms are facing pressure from higher interest rates and tight credit conditions by US regional banks.

On the Eurozone front, one more interest rate hike by the European central bank (ECB) has pushed interest rates to 4%. ECB President Christine Lagarde decided not to take the bullet for the bleak economic prospects in Eurozon ad continued its battle against persistent inflation.