Daily digest market movers: EUR/USD stays calm ahead of Eurozone, US PMIs
- EUR/USD consolidates in a tight range near 1.0850 as investors look for fresh cues about the interest rate outlook on both sides of the Atlantic. As for the United States, Federal Reserve (Fed) officials continue to emphasize the need to maintain the restrictive policy framework as they are not convinced that price pressures will sustainably return to the desired rate of 2%.
- US inflation declined as expected in April. However, Fed policymakers want to see more good inflation data to gain confidence that price growth is on course to return to the 2% target. Therefore, Fed policymakers reiterate that the current monetary policy is in good shape and needs to remain at its current levels.
- On Monday, Fed Vice Chair for Supervision Michael Barr said "Q1 inflation was disappointing and did not provide the confidence needed to ease monetary policy". Barr vowed to allow more time for a tight policy stance to do its job, Reuters reported. Separately, Atlanta Fed Bank President Raphael Bostic said to Bloomberg TV that officials would take a while to be certain that inflation will come down to 2%.
- Meanwhile, investors shift focus to the FOMC minutes for the May policy meeting, which will be published on Wednesday. Officials' view on the interest rate outlook in the May meeting is expected to be hawkish as hotter-than-expected inflation in the January-March period indicated that the progress in the disinflation process stalled.
- On the economic data front, investors await the preliminary Eurozone and United States PMI data for May, which will be published on Thursday. The PMI data will gauge the economic outlook of the respective nations.
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