Yesterday, we witnessed a strong rally in the euro and the British pound, fueled by speeches from Fed officials. The market particularly values comments from those voting on monetary policy decisions this year, so remarks from Loretta Mester and Mary Daly were under particular scrutiny. In general, policymakers still expect the US central bank to cut interest rates three times in 2024, although there is no rush to lower borrowing costs just yet.

San Francisco Fed President Mary Daly stated that the three rate cuts outlined by Fed representatives at the meeting last month seem reasonable, although there is no immediate need for adjustments. "I think that is a very reasonable baseline," Daly said on Tuesday during an event in Nevada. "Growth is going strong, so there's really no urgency to adjust the rate," she added.

Speaking to reporters on Tuesday, Cleveland Fed President Loretta Mester also said that she still sees three rate cuts as likely appropriate this year but signaled that fewer will probably be needed. Previously, Mester stated that she wants to see more evidence of inflation slowing before beginning to cut rates. "It really depends on what happens in the economy and how it evolves," Mester said. "Are those early readings that we got in inflation so far this year, are they saying that the disinflation process is stalling or is it going to be that those are sort of like a detour on the road and we're back on that downward path?"

Mester also said that higher-than-expected inflation figures from the start of the year mainly just confirmed the bumpy nature of disinflation, noting that she still believes price growth will continue to cool towards the Fed's 2% target, albeit at a slower pace than last year.

Recall that at the policy meeting on March 19-20, Fed officials were unanimous in beginning to cut the benchmark rate at some point in 2024, with the average forecast of Fed members pointing to three cuts this year. The current target range for the rate is 5.25% to 5.5%, with investors giving roughly equal chances of the first rate cut happening in June this year. They are also pricing in a rate easing of about 70 basis points by the end of the year.

As for EUR/USD technical analysis, demand for the euro persists. Buyers now need to protect the level of 1.0745 and then target 1.0790. Its breakout will allow buyers to reach 1.0830, but doing this without support from major players would be quite challenging. The most distant target stands at the peak of 1.0860. In a bear case scenario, major buyers are likely to take the lead at around 1.0755. Alternatively, it would be wise to wait for the price to hit a new low at 1.0725, or open long positions from 1.0690.

As for the GBP/USD pair, bears have slightly retreated, allowing buyers to continue a correction. Sterling needs to overcome the nearest resistance level of 1.2600 to extend its bullish run to the 1.2640 mark, above which it will be quite problematic to break. The most distant target lies in the area of 1.2670. Its breakout will make it possible to expect a sharp surge to 1.2700. In case of a decline, bears will try to take control over 1.2560. If they succeed, the British pound will most likely plunge to the low of 1.2535 and then head towards the 1.2500 mark.