• EUR/USD recovers sharply from below 1.0700 after upbeat Eurozone Q1 GDP, stubborn inflation data.
• Strong Eurozone data has raised concerns over ECB rate cuts from June.
• The US Dollar recovers amid caution ahead of the Fed’s policy decision.

EUR/USD bounces back strongly from below 1.0700 in Monday’s European session as the Eurozone preliminary inflation data for April and Gross Domestic Product (GDP) data for the first quarter have beat the consensus. Annually, the Harmonized Index of Consumer Prices (HICP) rose steadily and met estimates while core HCPI, that excludes food and energy prices, softened on a slower pace.

The Eurozone economy expanded at a stronger rate of 0.3% in the first quarter even though the European Central Bank (ECB) is maintaining its Main Refinancing Operations Rate at historic highs of 4.5%.

A sharp recovery in the Euro after the release of the key economic indicators suggests that investors’ confidence about the ECB pivoting to interest rate cuts from June would be significantly impacted. The speculation for the ECB reducing interest rates from June would be impacted in such a time when policymakers were divided over extending the rate-cut campaign to following meetings this year.