The EUR/USD pair broke through the key 1.0800 level during Wednesday’s New York session, spurred by unexpectedly mild US inflation figures for May. The latest Consumer Price Index report indicated that inflation is cooling faster than anticipated, fueling speculation that the Federal Reserve might cut interest rates starting in September. 

The core annual inflation rate, excluding the volatile food and energy sectors, eased to 3.4%, slightly below the forecast of 3.5% and April’s 3.6%. Meanwhile, headline inflation slowed to 3.3%, missing both expectations and the previous month's 3.4% figure. On a monthly basis, headline CPI was flat against projections for a modest 0.1% increase, and core inflation edged up by 0.2%, below the estimated 0.3% rise. 

Investors now turn their focus to the Federal Reserve's upcoming interest rate decision, set for the late American session. Market participants will scrutinize the Fed’s dot plot and inflation data, expecting the central bank to maintain the current rate range of 5.25%-5.50% for the seventh consecutive time. The dot plot will provide insight into the Fed’s outlook for interest rates in the medium and long term. 

The softer-than-expected inflation report weighed heavily on the US Dollar. The US Dollar Index, which measures the greenback against a basket of six major currencies, fell sharply below 104.50. Concurrently, the yield on the 10-year US Treasury note dropped below 4.30%, reflecting reduced expectations for future Fed rate hikes. 

Despite the Euro's recent gains, it faces headwinds from political uncertainty in France. The Eurozone's stability is under threat following President Emmanuel Macron's decision to call a snap election after a significant setback against the far-right National Rally (Rassemblement National), led by Jordan Bardella. Exit polls suggest that the RN party could secure 235 to 265 seats, falling short of the 289 required for an absolute majority. Analysts view Macron’s move as a risky bet that could further destabilize the centrist coalition. 

The EUR/USD pair has seen significant volatility in the first two days of the week, influenced by a mix of factors including softer US CPI data, expectations around the Fed's interest rate decisions, and political uncertainties stemming from the French elections. After dipping to the 1.07230 level, the pair rebounded strongly, challenging the upper boundary of its descending channel. This rebound highlights a critical support level around 1.07. With the upcoming FOMC meeting, a dovish stance from the Fed could propel the EUR/USD higher, with potential targets at 1.09 and 1.10. The confluence of these events suggests that the pair could experience heightened volatility, making the market outlook dependent on today's Fed commentary:

Regarding another key major currency asset, GBPUSD, the pair has convincingly broken through its medium-term resistance line, signaling a strong bullish momentum. This breakout shifts potential targets upwards, with the next significant level being the confluence of the ascending channel's upper boundary and the horizontal resistance around 1.29. The recent price action indicates that buyers are gaining confidence, likely aiming for the 1.29 mark in the near term. Given the current trajectory, continued strength could push the pair towards this target, especially if supported by favorable economic data or dovish signals from the Fed: