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- The EUR/USD pair is struggling to attract any significant buyers and is being undermined by a combination of factors.
- Political uncertainty in Europe, coupled with dismal Eurozone PMIs on Friday, appears to be weighing on the Euro.
- The Fed’s relatively hawkish stance is lifting the US dollar to multi-week highs and acting as a headwind.
The EUR/USD pair remains lower for the third day in a row on Monday and trades around the 1.0690-1.0685 area during the Asian session, just above its lowest level since early May.
The single currency continues to be undermined by doubts surrounding the outcome of early elections in France, which have raised concerns that the new government will worsen the financial situation in the euro zone’s second-largest economy. Furthermore, flash PMIs released on Friday indicated that growth in business activity in the euro zone slowed sharply in June. This, along with some subsequent USD buying, turned out to be major factors putting bearish pressure on EUR/USD.
The US Dollar Index (DXY), which tracks the greenback against a basket of currencies, rose to its highest level since May 9 in the wake of Friday’s flash. Purchasing managers indexWhich showed that US business activity rose to its highest level in 26 months in June. The data supports the case for the Federal Reserve’s (Fed) patient approach, although signs of easing inflationary pressure keep a September rate cut on the table. This may prevent USD bulls from placing aggressive bets and help limit any further downward movement in EUR/USD.
Traders may also prefer to wait for the US Personal Consumption Expenditures (PCE) price index data to be released this week on Friday to get signals on the path of the Fed’s rate cut. This, in turn, will play a major role in influencing the US dollar price dynamics in the near term and will provide some useful momentum higher. EUR/USD pair. Traders are now looking forward to the release of the German Ifo business climate report and speeches from influential FOMC members to seize short-term opportunities in the absence of any relevant macroeconomic releases from the US.
