Jens Nærvig Pedersen, senior analyst at Danske Bank, explains that the EUR/USD pair faced a reality check of Fed pricing yesterday when the Fed’s Bullard argued that a 50bp rate cut would be overdone and Powell failed to commit to easing.

“Comments from the two sent EUR/USD temporarily lower as USD rates shot higher. There is still some time to go before the 31 July FOMC meeting and more data and speeches to come, which means the market will likely continue to be in a limbo over whether to price a 50bp cut or not at the July meeting. In turn, EUR/USD should stay range-bound close to 1.14 near term before eventually rising to 1.15 in 3M as the Fed starts easing. Notably, there is still room for further reversal of short EUR/USD positions. Technically, the market will keep an eye on the 1.1448 top from 20 March.”