EUR/USD Weekly Outlook, May 4, 2026: The Fed Navigates Uncertainty

• The U.S. president will not be able to dictate the Federal Reserve’s decisions. Powell’s final meeting as chair will not mark his full exit, as he will remain on the board until 2028, creating a potential split between hawks and doves. For now, rates remain unchanged.
• Europe is suffering from higher energy costs as the closure of the Strait of Hormuz persists, while the ECB has warned that its next meeting could bring a rate increase.
• EUR/USD remains stuck, unable for now to choose a clear direction. The trading range continues to dominate.

Powell’s Final Meeting Leaves the Fed in Limbo

There was no shortage of jabs between Trump and Powell at the latest Federal Reserve meeting, chaired for the final time by a president who has certainly shown his ability to steer monetary policy through the end of quantitative easing and an inflation flare-up not seen since the 1970s.

For now, there are no rate cuts in the United States. Geopolitical uncertainty requires firm safeguards, keeping the current cost of money in place. The bond market itself does not believe in rate cuts either. Worried about inflation, investors have pushed the U.S. 10-year yield up to 4.5%.

Powell will remain on the Fed board until his term expires, and the newly appointed chair, Warsh, will have to count votes to make decisions. That creates a real risk for Trump that he will not be able to “control” the Fed. By then, however, the midterm elections will already be over.

The ball now passes to Warsh, who was effectively elected with Republican votes alone, a first in the history of the Federal Reserve chairmanship. Warsh says he is committed to independence from politics. The market will be the judge.

ECB rates also remain stable at 2%, though a 25-basis-point tightening in June now looks likely as the central bank tries to confront what is no longer merely a risk, but almost a certainty: rising inflation.

Meanwhile, the European economy is stalling, as shown by some recent GDP data. In France, for example, first-quarter growth was zero.

On the geopolitical front, uncertainty remains high. The reciprocal U.S. and Iranian naval blockades in the Strait of Hormuz have once again sent oil prices sharply higher, creating particular concern in Europe and Asia. It is a complex situation that could still lead to a renewed escalation in military tensions.

EUR/USD: Conflicting Signals

At this stage, it is difficult to take a firm view on EUR/USD. Several signals are pointing in opposite directions, whether from intermarket indicators, sentiment, or fundamentals. Today we will look at one of them, while next week we will examine another that points in the exact opposite direction.

Technical analysis is also stuck in a kind of limbo, with the pair unable to approach either the upper or lower end of the trading range that has been in place since Liberation Day. Until strong signals emerge above 1.19 or below 1.14, it remains difficult to take clear strategic positions on the world’s most closely watched currency pair.

In a stalemate for the world’s most famous currency pair, this week we look at an intermarket chart that confirms the confusion surrounding EUR/USD.

The chart compares the exchange rate on an inverted scale with the France-Germany spread. This yield differential has recently rebounded from lows that had themselves tested the rising uptrend line. The signal is interesting because, if it gains traction, similar moves in the past have put pressure on the euro. The episodes of 2021 and 2024 show clearly how much the French risk barometer has so far matt ered for the health of the euro.