On Monday, the US Dollar traded marginally lower against most major currencies, influenced by the Memorial Day holiday closure of US markets. This subdued performance stands in contrast to the more dynamic situation in Europe, where shifts in the European Central Bank's outlook are beginning to stir investor interest.

The economic data calendar for Monday was notably sparse, and the rest of the week is expected to follow suit, with only a few significant data points and Federal Reserve (Fed) speeches scheduled for later in the week. Investors are particularly focused on Thursday's second estimate of Q1 US Gross Domestic Product and Friday's US Personal Consumption Expenditures figures, which could provide further insights into the US disinflation trend and the Fed's future actions.

The EUR/USD pair is showing signs of potential bullish momentum and is currently trading near the upper boundary of a descending channel. The recent price action suggests a possible breakout above this resistance line, as indicated by the upward movement towards 1.0900. The Relative Strength Index (RSI) is trending upward and nearing the 70 level, which supports the bullish sentiment. Additionally, the pair is trading above the 50-period and 200-period moving averages, further indicating upward potential. Should the EUR/USD break above the channel resistance, the next target could be the psychological level of 1.1000:

Across the Atlantic, the ECB is capturing attention with its evolving stance. French ECB member François Villeroy de Galhau has suggested that a second rate cut in July remains a possibility, contradicting the 'one and done' message that has been prevalent among ECB officials.

Simultaneously, ECB Chief Economist Philip Lane has indicated that a rate cut in June seems almost certain, but he hinted that subsequent cuts may not occur as quickly as markets had anticipated. This position contrasts with the market's expectation of up to three cuts, with some ECB officials suggesting that the anticipated June cut could be the only one for 2024.

In the US, interest rate futures price in a 99.1% probability of no change in the policy rate for June. September futures paint a more varied picture, with 50.2% of investors expecting rates to stay the same, 44.9% anticipating a 25 basis points (bps) cut, and 4.5% predicting a 50 bps reduction.

Meanwhile, the Pound Sterling rose above 1.2750 against the USD in Monday’s New York trading session. The GBP/USD pair remains strong as expectations for the Bank of England to cut rates in June have diminished following a slower-than-anticipated drop in UK consumer inflation for April.

Economists had projected UK headline inflation to fall to 2.1% year-over-year in April, but it only eased to 2.3% from a previous 3.2%. Additionally, a slight decrease in UK service inflation, now at 5.9% from 6.0%, has raised concerns about inflation remaining persistently high. This stubborn service inflation continues to be a major obstacle to achieving the BoE's 2% target rate.

The GBP/USD pair is approaching a potential reversal zone near 1.2800, as indicated by the confluence of a descending trendline and the upper boundary of the ascending channel. The Relative Strength Index (RSI) is hovering around the overbought territory, suggesting that the upward momentum may be losing steam. Additionally, the price is near a critical resistance level, increasing the likelihood of a pullback. If the pair fails to break above this resistance, a correction towards the lower support levels at 1.2630 or even 1.2516 could be expected. Traders should watch for signs of bearish divergence or a break below the channel support to confirm the potential reversal: