The EUR/USD currency pair is showing a moderate decline amidst a neutral external environment. On Tuesday, the pair retreated, with the current quote standing at 1.0910.

The beginning of the week has been uneventful in terms of significant news. Consequently, the market has been focused on existing information, particularly the decision of the US Federal Reserve to pause its series of monetary policy tightening and devise a plan for July.

Within the coming month, the Fed will gather data and determine the next steps for its tight monetary policy. Over the past 15 months, interest rates have risen significantly, currently standing at 5.25% per annum. It will require more time to assess the full impact of these rate hikes on the economy.

Thus far, it is evident that the 5% rate increase over the specified period has contributed to a reduction in the CPI from 9.1% to 4%. While this outcome is positive, the inflation target of 2% remains lower.

If the Fed continues to raise interest rates excessively, it could lead to reduced spending by businesses and consumers alike. Employers may be forced to lay off employees to sustain their operations, potentially triggering a severe recession. Conversely, maintaining the interest rate at its current level could result in an inflationary rise.

The Fed appears to have reached a deadlock, facing the challenge of balancing its monetary policy amidst these conflicting factors.

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