EUR/USD rebounds from 1.0800 as Biden-McCarthy to discuss US debt-ceiling again on Monday

• EUR/USD has displayed a strong recovery from 1.0800 as US dent-ceiling negotiations were postponed further.
• US Biden-McCarthy talks will continue on Monday as prior partisan terms from Republicans were considered ‘unacceptable’.
• The ECB will be courageous to take the decisions needed to bring inflation back to 2%.

The EUR/USD pair has shown a sharp recovery from near the round-level support of 1.0800 in the early Tokyo session. The major currency pair has shown resilience around 1.0800 as the US debt-ceiling talks didn’t display positive developments on the weekend.

US President Joe Biden and House of Representatives Joseph McCarthy will meet again on Monday to discuss a bipartisan deal against as prior partisan terms from Republicans were considered as ‘unacceptable’. The White House is not interested in cutting the whole budget spending wrath by 8%.

S&P500 further generated losses in early Asia. Negative sentiment for US equities recorded on Friday have carry-forwarded on Monday as investors are worried that US President Joe Biden would be forced to execute his 14^th Amendment right to safeguard the United States economy from a default.

The US Dollar Index (DXY) has retreated after a less-confident pullback to near 103.20 as uncertainty linked to the US borrowing cap raise is escalating dramatically. Apart from that, dovish interest rate guidance from Federal Reserve (Fed) chair Jerome Powell also weighs pressure on the USD Index. Fed’s Powell said on Friday that the recent banking crisis, which led to tighter credit standards, has eased the pressure to hike interest rates. He further added, "Our policy rate may not need to rise as much as it would have otherwise.”

On the Eurozone front, more interest rate hikes are needed to tame stubborn inflation. European Central Bank (ECB) President Christine Lagarde said on Friday, “ECB will be courageous to take the decisions needed to bring inflation back to 2%.” ECB Lagarde has already confirmed that more than one interest rate hike is appropriate to ease inflationary pressures.

Investors should note that Eurozone inflation rebounded to 7% in April as the recent fall in food prices has been offset by higher energy and services prices.