EUR/USD staged a bullish breakout following soft US PPI figures, which, however, proved to be short-lived as a hawkish FOMC update and EU political concerns dominate the market narrative. 

The PPI data revealed that the core PPI remained unchanged month-over-month, while the headline PPI figure saw a 0.2% decline, defying market expectations of a rise. Furthermore, the core annual PPI edged down to 2.3%, compared to the anticipated 2.4%. 

Such data typically indicates that producers are reducing prices due to anticipated or existing weak demand. This development has buoyed hopes of a cooling inflation environment, thereby slightly adding probability to the outcome where the Fed starts the easing cycle in September. 

The EUR/USD pair recently rebounded strongly from the 1.0723 level, pushing above the significant 1.0800 mark. Despite the encouraging CPI data from the US, which showed a cooling inflation trend, the pair's momentum appears to be capped by political uncertainties within the European Union. The chart indicates a recovery attempt, but the presence of a descending trendline and the recent sell-off suggest that investors are increasingly demanding a risk premium for holding Euro and European assets amid these political concerns. Additionally, the slightly hawkish tone from the FOMC has provided underlying support for the US Dollar, adding to its strength. This combination of factors is likely to weigh on the Euro and could extend to the Pound, reflecting broader apprehensions about the stability of European markets. The RSI also indicates potential resistance ahead, reinforcing the cautious sentiment among traders:

On Wednesday, the Fed maintained the interest rate at 5.25%-5.50% for the seventh consecutive time and signaled fewer rate cuts than previously anticipated. 

The Fed's dot plot now suggests just one rate cut this year, down from the three predicted in March. This adjustment comes in light of a robust labor market and persistently high inflation during the first quarter of the year. Additionally, the Fed revised its year-end forecast for the core Personal Consumption Expenditures Price Index up to 2.8% from 2.6%. 

During the press conference, Fed Chair Jerome Powell acknowledged the positive signs from the May CPI report but emphasized the need for more consistent data before considering a shift in policy. Powell refrained from indicating any timeline for rate cuts, advocating for the current interest rate framework to be sustained longer. 

Prior to the Fed's announcements, the CPI report indicated a cooling of US inflation in May. Monthly headline inflation remained steady, and core inflation increased by 0.2%, less than the projected 0.3%. 

In labor market news, US jobless claims for the week ending June 8 rose to 242K, exceeding both the forecasted 225K and the previous week's 229K. The seasonally adjusted insured unemployment rate held steady at 1.2%, with the four-week moving average rising by 4,750 to 227,000. Continuing claims also climbed by 30,000 to 1.82 million for the week ending June 1. 

Meanwhile, investors are closely watching the French political landscape as the parliamentary elections draw near. Polls indicate that Marine Le Pen's far-right National Rally is mounting a strong challenge but is slightly short of achieving an outright majority. French Finance Minister Bruno Le Maire has warned that if the National Rally gains power and implements its program, a debt crisis could ensue in France.