EUR/USD falls to near 1.1300 as bond market optimism offsets impact of US-EU easing

• EUR/USD depreciates as the US Dollar strengthens, as US yields weaken due to Japan’s potential cuts in government debt issuance.

• The Greenback gains ground ahead of the May 7 FOMC Meeting Minutes release on Wednesday.

• Trump expressed his satisfaction as the EU is speeding up the process to reach a trade deal with the United States.

EUR/USD continues its losses for the second successive day, trading around 1.1310 during the Asian hours on Wednesday. The pair depreciates as the US Dollar (USD) draws support and as US yields depreciate following Japan’s indication of potential cuts in government debt issuance, which has boosted global bond markets. At the time of writing, the 10- and 30-year yields on US Treasury bonds are standing at 4.46% and 4.97%, respectively.

Additionally, the Greenback received support as the Conference Board's Consumer Confidence Index rose to 98.0 in May from the previous 86.0 reading. Meanwhile, US Durable Goods Orders fell by 6.3% in April against a 7.6% increase prior. This figure came in better than the estimated decrease of 7.9%. Traders likely await the FOMC Minutes, which are due later on Wednesday.

Federal Reserve Bank of New York President John Williams emphasized the importance of inflation expectations should be well anchored. Williams wants to avoid inflation becoming highly persistent because that could become permanent by responding relatively strongly when inflation begins to deviate from the target. On Tuesday, Minneapolis Fed President Neel Kashkari said that policymakers should avoid any adjustment in interest rates until reaching clear estimations of the impact on inflation due to higher tariffs.

However, the risk-sensitive Euro (EUR) gained support as trade tension eased between the United States (US) and the European Union (EU). On Sunday, US President Donald Trump extended the tariff deadline on imports from the EU from June 1 to July 9. On Monday, the Brussels agreed to speed up trade talks with the United States to avoid a transatlantic trade war.

On Tuesday, US President Donald Trump expressed his satisfaction in a post on Truth Social, noting that the EU is accelerating the process towards reaching a trade deal with the United States. Trump wrote, "I was extremely satisfied with the 50% Tariff allotment on the European Union, especially since they were 'slow walking". I have just been informed that the EU has called to quickly establish meeting dates. This is a positive event, and I hope that they will.