EUR/USD fell Friday as U.S. rate SRAU3 and dollar gains helped to erase the overnight rally, and a further slide may be on the cards as U.S. data sows doubts about a pause in Fed hikes while expectations of more tightening increase.
Data suggests the probability of a U.S. recession will decrease while inflation may be rising again. April consumer spending and core PCE came in above estimates.
May University of Michigan consumer sentiment beat expectations but its 1-year and 5-year inflation expectation components fell from April's print.
The dollar rallied as investors lowered expectations for Fed rate cuts and increased the probability a hike will come in June Click here
The dollar's yield advantage over the euro increased.
U.S.-German 2-year yield spreads US2DE2=RR traded at their widest since March 21.
The upbeat U.S. data and yield spread influence is likely to keep EUR/USD bulls on defense.
Should a U.S. debt ceiling deal be reached U.S. rates may increase further, keeping bearish pressure on EUR/USD.
Technicals highlight downside risks.
A long upper wick has formed on Friday's candle, monthly RSI is falling and EUR/USD held below the 10-DMA and daily cloud.
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