• EUR/USD falls as a firm US Dollar gained support from rising expectations of a hawkish Federal Reserve stance.
• President Trump will swear in Kevin Warsh as the US Federal Reserve chair on Friday at the White House.
• The Euro fell as flash PMI data showed the Euro Area economy shrinking at its fastest pace since late 2023.

EUR/USD remains subdued for the second successive day, trading around 1.1610 during the Asian hours on Friday. The pair depreciates as the US Dollar (USD) remains firm, supported by rising odds of hawkish sentiment surrounding the Federal Reserve (Fed) policy stance.

Prolonged energy disruptions from the ongoing war threaten to feed into core US consumer prices and inflation expectations, which could potentially push the Fed to keep interest rates higher. Furthermore, a stronger US economic growth outlook is adding weight to the case for monetary tightening and boosting the Greenback.

Fed officials remain cautious as they evaluate whether to adjust short-term interest rates. While they are currently holding the federal funds rate steady, policymakers are moving away from the idea of rate cuts and are increasingly open to raising rates if inflation fails to cool down.

The administration of US President Donald Trump announced that Trump will swear in Kevin Warsh as the chair of the US Federal Reserve on Friday at the White House. The new chair succeeds Jerome Powell, whose term expired on Friday but who has continued to serve on a pro-tempore basis until the transition.

On the US data front, the Department of Labor (DOL) showed that Initial Jobless Claims fell by 3,000 to 209,000 during the second week of May, indicating continued resilience in the labor market. Meanwhile, Continuing Jobless Claims increased to 1,782,000 for the week ending May 9, up from 1,776,000 the previous week.

The Euro (EUR) struggles against the US Dollar (USD) as traders reacted to a surprising contraction in the Eurozone economy. According to the latest S&P Global flash PMI data release on Thursday, the Euro Area economy shrank in May at its fastest pace since late 2023, driven by a conflict-fueled surge in living costs that stifled service demand and pushed input price inflation to a three-year high.

Market attention now shifts to upcoming German economic indicators, including the June GfK Consumer Confidence Survey, Q1 GDP figures, and the IFO Business Survey.

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