FX.co ★ Euro Rises as ECB Signals Pause; Fed Faces Growing Rate Cut Bets

The euro has maintained its position above the $1.14 level, approaching its highest mark in three years last observed in April. This comes as investors scrutinize the increasingly contrasting policy stances of the European Central Bank (ECB) and the United States Federal Reserve. Recent statements from ECB officials have bolstered speculation that the bank might soon pause its easing cycle, opting for a wait-and-see strategy to evaluate the impact of fresh US tariffs on the economy. In May, inflation within the Eurozone decreased to 1.9%, coinciding with the ECB's eighth successive rate reduction that lowered the deposit facility rate to 2%. Concurrently, the Eurozone economy demonstrated robustness, achieving a 0.6% expansion in the first quarter, marking the fastest growth rate since the third quarter of 2022. Conversely, weaker-than-anticipated US inflation figures have put pressure on the dollar, sparking conjecture that the Federal Reserve might initiate rate cuts as soon as September. Nonetheless, uncertainty remains prevalent, given the relative robustness of inflation and the labor market despite mounting growth challenges posed by tariffs.