The EUR/USD pair paused its four-day winning streak, hovering around 1.0760 during the Asian trading hours on Tuesday. Despite this setback, the Euro found support from stronger-than-expected Eurozone Purchasing Managers Index (PMI) data released on Monday. Attention now turns to the upcoming European market session for Retail Sales data, offering insights into the short-term performance of the retail sector, a key contributor to the Eurozone economies’ total value added.
Philip R. Lane, Chief Economist of the European Central Bank (ECB), expressed increased confidence in inflation returning to the 2% target, raising the likelihood of an interest-rate cut in June. Lane, in an interview with Spanish newspaper El Confidencial, referenced last week’s report on consumer prices, noting easing pressures in the service sector as a pivotal step toward curbing inflation.
April’s HCOB Eurozone Services PMI indicated robust growth, surpassing initial estimates and marking the strongest expansion in nearly a year. Elevated demand drove higher output, with new business volumes expanding at the quickest pace since May of the previous year.
Meanwhile, in the United States, Richmond Federal Reserve President Thomas Barkin warned that elevated interest rates could stifle economic growth but may help alleviate inflation pressures, inching closer to the central bank‘s 2% target. Barkin emphasized the need for consistent declines in inflation before considering reductions in borrowing costs, highlighting concerns about persistent inflation in housing and services sectors.
The US Dollar (USD) witnessed an upward correction, exerting pressure on the EUR/USD pair. However, softer US labor data released on Friday sparked hopes for potential interest rate cuts by the Federal Reserve in 2024, bolstering investors’ risk appetite and weakening the Greenback against the Euro.
