In Friday's trading session, the EUR/USD surged above the 1.0850 mark, bolstered by stronger-than-expected inflation figures from the Eurozone. According to Eurostat, the Harmonized Index of Consumer Prices showed an annual increase of 2.6% for May, surpassing both the anticipated 2.5% and April's 2.4%. Additionally, the core HICP, which strips out volatile elements like food, energy, alcohol, and tobacco, rose to 2.9%, slightly ahead of the forecasted 2.8% and April's 2.7%.

Despite these hotter inflation numbers, the impact on the European Central Bank’s anticipated rate cuts in June appears minimal. The market has largely priced in these cuts, given the persistent easing of price pressures and continued progress in service sector disinflation. Nonetheless, the inflation data will likely influence the ECB's rate-cut strategy beyond June.

The US Dollar Index (DXY) shows visible pressure at the lower bound of its ascending channel, with the price testing this support level multiple times. Recently, the index appears to have initiated a bearish breakout below this channel, signaling a potential shift in momentum. The 104.184 support level is critical; if breached decisively, it could accelerate the downward move. The RSI is hovering near oversold territory, which may indicate further downside potential. The bearish momentum might increase if the index fails to reclaim the 105.027 resistance level, suggesting a continuation of the current downtrend:

Market participants should brace for heightened volatility in the EUR/USD pair, especially with the upcoming release of the US core Personal Consumption Expenditure Price Index for April. The core PCE, the Federal Reserve’s preferred inflation gauge, is projected to rise by 0.3% month-over-month and 2.8% year-over-year. A steady or higher-than-expected reading could lead traders to scale back expectations for Fed rate cuts in September, while a softer figure might strengthen the case for a September rate reduction.

The Pound Sterling advanced too on broad-based USD weakness. Before the data release on Friday, the cable struggled to maintain its recovery as the Greenback stabilized following a significant correction triggered by revised Q1 US GDP data. The US Bureau of Economic Analysis reported a slower growth rate of 1.3%, down from the initial estimate of 1.6%, largely due to weaker consumer spending.

On the UK front, the economic outlook appears more optimistic. A Lloyds Bank survey indicated a boost in business confidence, reaching its highest level since November 2015. This surge in optimism is attributed to easing price pressures and strong expectations for the Bank of England to begin cutting interest rates sooner than anticipated.

The GBP/USD chart shows the pair trading within an ascending channel, currently testing resistance near the 1.2800 level. This resistance coincides with a long-term descending trendline, indicating a potential critical juncture for the pair. The RSI is approaching overbought territory, suggesting that the bullish momentum may be waning. If GBP/USD fails to break above this resistance, a pullback toward the 1.2516 support level is likely. However, a decisive breakout above 1.2800 could propel the pair towards the next resistance at 1.2892, continuing the upward trajectory: