Key facts
- Euro futures declined, with the June contract falling 0.81%.
- The U.S.-EU interest rate differential narrowed from over 200 bps to approximately 150 bps.
- Markets price in a 90% probability of a 25 bps rate hike at the upcoming ECB policy decision on June 11.
- Hot May Eurozone inflation showed a 3.2% print.
- Strong U.S. data leads to pricing of an additional Fed rate hike before year-end.
Euro futures experienced downward pressure, with the June contract marking its fourth lower close in five sessions and a 0.81% decline. This movement is largely driven by a narrowing interest rate differential between the U.S. and the EU, which has decreased from over 200 basis points to approximately 150 basis points. This shift is influenced by market expectations of late 2025 Fed rate cuts. Traders are anticipating the European Central Bank's policy decision on June 11, where a 25 basis point rate hike is priced in with 90% probability, supported by hot May Eurozone inflation data showing a 3.2% print. However, the U.S. dollar's strength, fueled by robust domestic economic data and expectations of an additional Fed rate hike before the end of the year, continues to limit the euro's potential gains.