EUR/USD extends its downside below 1.0650 on hawkish Fed remarks

• EUR/USD remains under selling pressure near 1.0640 on the stronger USD on Friday.
• Fed’s Bostic said US inflation is expected to return to target at a slower pace than previously anticipated.
• ECB policymakers noted the central bank should cut rates in June to avoid falling behind the inflation curve.

The EUR/USD pair extends its downside around 1.0640 after retreating from weekly peaks of 1.0690 on Friday during the early Asian session. The hawkish comments from Federal Reserve (Fed) officials provide some support to the US Dollar (USD). Later in the day, Chicago Fed Austan Goolsbee is set to speak.

On Thursday, the number of US citizens that filed new claims for unemployment benefits rose by 212K for the week ending April 13 from the previous weekly gain of 212K (revised from 211K). This figure came in below the market consensus of 215K, according to the US Department of Labor. The report indicated that the labor market remains resilient and investors expect that the US Fed might delay cutting interest rates until September.

Fed Chair Jerome Powell noted on Tuesday that monetary policy needed to be restrictive for longer as inflation continued to surprise on the upside in the first three months of the year. Atlanta Fed President Raphael Bostic said on Thursday that US inflation is expected to return to the 2% target at a slower pace than many had anticipated. Bostic added that he’s comfortable being patient and rate cuts are likely by year end. Meanwhile, New York Fed President John Williams said that he doesn’t feel an urgency to cut rates and that monetary policy is in a good place. The strong US economic data and the higher-for-longer US rate narrative continue to lift the Greenback and act as a headwind for the EUR/USD pair.

Across the pond, the European Central Bank (ECB) signaled that it might start cutting the interest rate in June. ECB Vice President Luis de Guindos said on Thursday that the central bank will be ready to reduce the restrictions on its monetary policy stance if the data evolves as it expects. The ECB policymaker François Villeroy de Galhau emphasized that the ECB should cut interest rates in June to avoid falling behind the inflation curve.

Elsewhere, ECB policymaker Joachim Nagel said a June rate cut appeared increasingly likely, although certain inflation data remains higher than expected. The growing speculation that the ECB will begin to cut the interest rate earlier than the US Fed exerts some selling pressure on the Euro (EUR) and caps the EUR/USD’s upside for the time being.