EUR/USD rebounds after hitting weekly low, ahead of Fed and ECB policy decisions

• EUR/USD stays firm at around 1.1050 ahead of the FOMC’s decision.
• The US ADP Employment report for April almost doubled the forecasts, as private hiring increased to almost 300K.
• The US Federal Reserve is expected to raise rates b 25 bps, though Powell’s message is still uncertain.

The EUR/USD extends its gains after hitting a weekly low of 1.0942 on Tuesday, as traders brace for the Federal Reserve (Fed) and the European Central Bank (ECB) monetary policy decisions today and on May 4. At the time of writing, the EUR/USD is trading around  1.1050, above its opening price by 0.44%.

EUR/USD is steady as US ADP Employment report surpasses expectations ahead of uncertain Fed decision

A risk-on impulse took over, despite renewing banking concerns in the United States (US). Wall Street is trading with gains, though lower US Treasury bond yields undermined the US Dollar (USD), hence the EUR/USD advanced.

Therefore, the US Dollar Index (DXY), a measure of the buck’s value against six currencies, drops 0.54%, down to 101.41.

The latest data in the US economic agenda revealed that private hiring increased above estimates, but wages eased. April’s ADP Employment Change report showed that the economy added 296K jobs, exceeding forecasts of 148K. That triggered a reaction in the pair, as the EUR/USD dived to the 1.1020s region before bouncing and climbing to its daily high at 1.1060.

Of late, the ISM revealed the Non-Manufacturing PMI for April, also known as the Services, which rode by 51.9 above March’s 51.2. digging into the data, the price subcomponent held close to its lowest levels since 2020, while the employment index showed moderation.

Across the pond, the Eurozone (EU) docket featured the Unemployment Rate for March, which dipped to 6.5%, beneath the estimates and the prior’s month reading of 6.6%.

In the meantime, the EUR/USD traders prepare for the Federal Reserve decision. Odds for a 25 bps hike lie at 86.8%, as shown by the swaps markets. Notably, according to the futures market, this is the last increase expected by investors, as they are already pricing in 75 bps of rate cuts by year’s end.

On the Europan Central Bank front, estimates are lingering between a 50 or 25 bps increase. Although a 25 bps rate hike is already priced in, going twice is likely possible after the latest EU inflation data report. That has been the reason that underpinned the EUR/USD pair during the last couple of months.

EUR/USD Technical Levels