Ella 
EUR/USD rebounded after breaking below the key support level of 1.0800 in European trading on Thursday. Although the market sentiment remains cautious, the major currency pairs are starting to recover as the US dollar (USD) corrects. The US dollar index (DXY), which tracks the value of the US dollar against six major currencies, fell after hitting a two-week high just above 105.00.
Investors flocked to the US dollar as they expect the Federal Reserve will not be inclined to cut interest rates in the short term. Fed policymakers have made it clear that they want to see inflation slow down in a few months to gain confidence that price pressures will return to the expected 2% level on a sustained basis.
Fed officials see the possibility of further rate hikes as less likely, but rate hikes are still possible if the anti-inflation process stalls. Looking for new clues on the interest rate outlook, investors turned their focus to the US core personal consumption expenditures price index (PCE) for April, which will be released on Friday and will have a major impact on speculation of a September rate cut by the Federal Reserve. The annual and monthly core PCE inflation data are estimated to have risen steadily by 2.8% and 0.3%, respectively.
