Article by: ETO Markets

The EUR/USD pair fell on Wednesday after the Federal Reserve released its latest Meeting Minutes. The minutes revealed that the Federal Open Market Committee (FOMC) remains determined to see more evidence of inflation easing to 2% before considering rate cuts. This cautious stance dampened risk appetite among investors who are eagerly waiting for dovish signals from the Fed.

- Monitor Fed Signals: Keep an eye on any new data or statements from the Fed that might indicate a shift towards a more dovish stance.
- Watch PMI Data: European and US PMI figures could influence EUR/USD volatility. Stronger-than-expected data might boost the euro, while weaker data could weigh on it.

Upcoming Economic Data:
    - European PMI Data (Thursday):
        - Manufacturing PMI expected to rise to 46.2 from 45.7.
        - Services PMI expected to increase slightly to 53.5 from 53.3.
    - US PMI Data (Thursday):
        - Manufacturing PMI expected to remain steady at 50.0.
        - Services PMI expected to hold at 51.3.

The GBP/USD pair continues its rally, reaching 1.2720 in the early Asian session on Thursday. This surge is fueled by hotter-than-expected UK CPI inflation data, reducing the chances of a Bank of England (BoE) rate cut in June.

Later today, watch for the UK and US flash Purchasing Managers Index (PMI) reports, which could impact the pair further.

- UK CPI Inflation Data:
   - April's UK CPI rose by 2.3% year-over-year, down from 3.2% in March, marking the lowest level since July 2021.
   - This unexpected inflation data has significantly lowered market expectations for a BoE rate cut in June, now just 18% compared to 50% earlier this week.

- FOMC Meeting Minutes:
   - Released on Wednesday, the minutes revealed concerns about persistent inflation, making the Federal Reserve hesitant to cut rates soon.
   - Fed Chair Jerome Powell emphasized the need for patience with current restrictive policies to manage high inflation.
   - Investors currently see a 60% chance of a Fed rate cut in September, according to the CME Fed Watch Tool.

Keep an eye on the upcoming PMI reports from both the UK and the US, as they could provide further insights and influence the GBP/USD pair's direction.

The USD/JPY pair has regained ground, currently trading at 156.67, marking a 0.31% increase. This recovery comes after the release of the US Federal Reserve meeting minutes, which indicated the possibility of future rate hikes should inflation remain a concern. This news provided a bullish impetus to the USD/JPY, pushing it past the 156.50 mark.

The recent move higher in USD/JPY highlights the market's reaction to potential monetary policy tightening by the Federal Reserve. Forex traders are closely monitoring economic indicators and Fed communications for further clues on interest rate decisions. Higher interest rates in the US typically boost the USD/JPY pair due to the interest rate differential, making the dollar more attractive compared to the yen.

Upcoming Economic Data:
    - US Inflation Data: Any significant deviation from expectations can influence Fed policy outlook and impact USD/JPY.
    - Japanese Economic Reports: Keep an eye on key data releases such as GDP, CPI, and trade balances, which can affect the yen's strength.
    - Fed Speeches and Minutes: Regular updates and minutes from the Federal Reserve will continue to provide insights into future rate hikes.