EUR/USD Falls Below 1.0700 As Fed Releases Hawkish Rate Outlook

EUR/USD fell below the 1.0700 round-figure support during the European session on Wednesday. EUR/USD remains weak as the euro’s near-term outlook weakens amid uncertainty over the European Union (EU) legislative elections and growing speculation that the European Central Bank (ECB) may subsequently cut interest rates.

French President Emmanuel Macron’s call for emergency elections after his party lost to Marine Le Pen’s far-right National Rally in preliminary election results heightened market concerns about the eurozone election. The euro could face further pressure if there is a major policy shift in the common European continent.

Meanwhile, expectations for consecutive ECB rate cuts have strengthened as the outlook for the German economy appears to be deteriorating due to weak demand prospects. Data on Monday showed that Germany’s IFO expectations index unexpectedly fell to 89.0 from an estimated 91.0 and a previously released 90.3 (revised down from 90.4). “It is difficult for the German economy to overcome stagnation,” IFO President Clemens Fuest said when the data was released.

This week, investors will focus on Friday’s preliminary inflation data for Spain, France and Italy for June.

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