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Some Sellers Are Drawn to EUR/USD Near 1.0730, with the Focus on Fedspeaks
Tuesday near 1.0730, EUR/USD trades on a weakened note for the fourth consecutive day. The US Manufacturing PMI increased to 50.3 in March, exceeding expectations, from 47.8 in the previous reading. According to ECB Stournaras, the institution may reduce interest rates by 100 basis points this year.
The EUR/USD pair reached virtually weekly lows of 1.0730 during early Asian trading hours on Tuesday, indicating that selling pressure persists. Higher US Treasury bond yields and an increase in the US Dollar Index (DXY) above 105.00 both exert pressure on the major pair. Later on Tuesday, a number of Federal Reserve (Fed) officials are scheduled to speak, including Loretta Mester, Michelle Bowman, John Williams, and Mary Daly.
The Institute for Supply Management (ISM) reported on Monday that, for the first time in nearly 18 months, U.S. manufacturing activity entered an expansionary phase in March, characterized by increased production and new orders. In March, the Manufacturing PMI increased from 47.8 in the previous reading to 50.3, exceeding the market consensus of 48.4. The US Dollar acquires momentum in the wake of the optimistic US Manufacturing PMI. The CME FedWatch Tool indicates that investors have increased the probability they have priced in for the Fed to reduce rates by 25 basis points (bps) in June from 55.2 prior to the data release to nearly 61%.
Robert Holzmann, a member of the Governing Council of the European Central Bank (ECB), stated on Saturday that the ECB might reduce its essential interest rate prior to the US Federal Reserve. Furthermore, ECB policymaker Yannis Stournaras speculated that the institution might reduce interest rates by 100 basis points this year; however, no consensus has yet developed on this matter. Last week, Stournaras stated that the central bank had no cause to observe the Fed's rate cut prior to its own. The dovish remarks made by policymakers of the European Central Bank (ECB) serve as a headwind for the EUR/USD pair by applying some selling pressure to the Euro (EUR).
The HCOB manufacturing PMI for Spain, Italy, France, Germany, and the Eurozone will be closely monitored by market participants. Traders will keenly monitor the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for March on Wednesday. The focus will transition to US Nonfarm Payrolls on Friday.
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