• EUR/USD holds positive ground near 1.0875 in Monday’s early Asian session. 
• Many Fed officials emphasized their cautious stance to hold rates higher for longer. 
• ECB’s Schnabel said they should move cautiously on rate cuts because there is a risk of easing prematurely. 

The EUR/USD pair trades on a stronger note around 1.0875 on Monday during the early Asian trading hours. The uptick in the major pair is bolstered by the softer Greenback. The Federal Reserve’s (Fed) Bostic, Barr, Waller, Jefferson, and Mester are scheduled to speak on Monday. Eurozone data highlight will be preliminary May PMI on Thursday.

Inflationary pressures eased in April, but the progress was unlikely to prompt the Fed to lower interest rates soon. The Fed Chair Jerome Powell said that he thinks the US central bank will need more data to gain confidence on whether inflation is steadily falling towards 2%. Furthermore, several Fed officials emphasized their cautious stance to hold rates higher for longer. 

Last week, Atlanta Fed President Raphael Bostic stated he saw signs of cooling inflation in the recent CPI report, but he prefers to watch the May and June data to make sure that the inflation doesn’t turn back the other way. Cleveland Fed President Loretta Mester said policy was well positioned, and it was premature to say progress on inflation had stalled. Richmond Fed President Tom Barkin noted the central bank needs to keep borrowing costs high for longer to ensure inflation is on track to its target. The lower bets on rate cut expectations from the US Fed might lift the USD and create a headwind for the EUR/USD pair. 

Across the pond, European Central Bank (ECB) policymaker Isabel Schnabel said the ECB may slash interest rates in June, but warned about further cuts in borrowing costs given uncertainty over the outlook. Nomura analysts stated “a gradual pace of three cuts this year is currently the most probable scenario,” despite the ECB's actions remaining data-dependent and could shift to more aggressive cuts if economic conditions worsen. 

• AUD/USD posts modest gains around 0.6695 on Monday. 
• The markets remain unconvinced that the Fed will pivot earlier than previously expected. 
• Australia’s Unemployment Rate rose more than expected last month, easing the possibility of another RBA rate hike.

The AUD/USD pair trades with a mild positive bias near 0.6695 during the early Asian session on Monday. The weaker US Dollar (USD) provides some support to the pair. The Fed’s Bostic, Barr, Waller, Jefferson, and Mester are set to speak on Monday. The Reserve Bank of Australia (RBA) will publish the minutes of its monetary policy meeting on Tuesday. 

Fed officials remain very cautious about cutting interest rates prematurely. Richmond Fed President Thomas Barkin noted that inflation is easing but highlighted that it will "take more time" to reach the Fed’s 2% target. Cleveland Fed President Loretta Mester said that the Fed's current monetary policy stance is appropriate as it continues to assess incoming economic data. Additionally, Fed Governor Michelle Bowman said the policy is restrictive but is willing to hike rates if inflation stalls or reverses.

The FOMC minutes will be due on Wednesday. In the latest meeting, the Fed held rates steady and the tone of the policy statement was little changed. The US central bank emphasized a lack of further progress toward its inflation objective. Investors have priced in 10% odds of a cut in June and nearly 80% chance in September. The higher-for-longer US rate narrative might boost the Greenback in the near term and cap the upside of the AUD/USD pair.

On the Aussie front, Australia’s jobless rate climbed more than expected last month, easing the chance of another RBA rate hike. The recent jobs report showed the economy added 38.5K jobs in April, while the Unemployment Rate rose to 4.1%. According to the RBA’s forecasts for employment and inflation, the Australian central bank expected the jobless rate would be 4% by June, 4.2% by year end, and 4.3% in June 2025.