EUR/USD eyes a break above 1.0880 as USD Index to deepen correction further, Eurozone GDP eyed

• EUR/USD is looking for a break above 1.0880 amid a cheerful market mood.
• The US Treasury expects that it would be able to pay bills only through June 1 without a debt limit increase.
• Eurozone GDP is seen unchanged on a quarterly and an annual basis at 0.1% and 1.3% respectively.

The EUR/USD pair is showing a back-and-forth action below the immediate resistance of 1.0880 in the Asian session. The major currency pair is expected to surpass the immediate resistance as the US Dollar Index (DXY) is still in a corrective mode.

S&P500 futures added decent gains on Monday as the Federal Reserve (Fed) is perceived to pause the interest-rate hiking spell. Easing fears of recession due to no further restriction on the interest rate policy will induce optimism among investors and general producers.

The USD Index is expected to extend its correction further below 102.40 amid dovish commentary from Atlanta Federal Reserve President Raphael Bostic. Fed policymaker told Bloomberg on Monday that, if he were voting now, he would vote to hold rates in June. However, he warned that he has to keep a possible rate hike on the table.

On Tuesday, investors will keenly focus on US debt-ceiling negotiations. Reuters reported that “The US Treasury Department reiterated on Monday it expects that it would be able to pay the US government's bills only through June 1 without a debt limit increase, increasing pressure on congressional Republicans and the White House to reach a deal in coming days.”

Meanwhile, Eurozone investors will keep focusing on preliminary Gross Domestic Product (GDP) data for the first quarter of CY2023. The pace in GDP growth is seen unchanged on a quarterly and an annual basis at 0.1% and 1.3% respectively.

The street is confused about the number of interest rate hikes from the European Central Bank (ECB). MNI reported on Monday that the ECB was most likely to raise key rates once or twice more in this tightening cycle.

According to MNI, the majority of the ECB Governing Council still sees it unlikely for the policy rate to reach 4%.