Euro awaits Fed minutes

EUR/USD remains stable ahead of the release of the Minutes from the Federal Open Market Committee (FOMC) meeting held on May 1, scheduled for Wednesday. The pair hovers around 1.0850 during the Asian trading session. 

The Federal Reserve (Fed) maintains a cautious stance regarding inflation and the possibility of rate cuts in 2024. Federal Reserve Bank of Boston President Susan Collins, speaking at the event "Central Banking in the Post-Pandemic Financial System" on Wednesday, emphasized that progress toward interest rate adjustment will take longer and stressed the importance of patience as the right policy for the Fed. 

Financial markets anticipate the first interest rate cut to occur in September at the earliest, with two reductions of a quarter percentage point each expected before the end of the year. According to the CME FedWatch Tool, the probability of the Federal Reserve implementing a 25 basis-point rate cut in September has slightly increased to 50.3%, compared to 49.6% a day ago. 

On the Euro front, Eurostat released a Trade Balance of €24.1 billion in March, wider than the previous month's €22.8 billion and surpassing market forecasts of €19.9 billion. This marked the largest trade surplus since December 2020. 

The uncertainty surrounding the European Central Bank (ECB) extending the rate-cut cycle beyond June has intensified, providing support for the Euro. While ECB policymakers are comfortable with the idea of the central bank beginning to lower its three key interest rates starting from the June meeting, they are hesitant to commit to any further rate trajectory. Instead, they prefer to maintain a data-dependent approach.