Euro bulls may get respite if Fed pauses rate hikes

Slowing inflation in the bloc and fading optimism about growth in the euro zone contributed to the single currency's worst monthly performance since April 2022. However, despite the headwinds, investors are increasingly inclined to view renewed weakness in the euro against the dollar as a buying opportunity, citing the likelihood that the Federal Reserve will pause interest rate hikes in June.

Geoff Yu, senior foreign exchange strategist at Bank of New York Mellon, said that it is no longer easy to sell the euro like it was a month or two ago, and the peak of the euro's decline has already occurred. Sam Lynton-Brown, head of global macro strategy at BNP Paribas, said now is a good time to buy the euro on dips rather than sell on rallies. A year from now, expect EURUSD to be above 1.10, don't think the pair will drop below 1.05 and stay there.