Euro ahead of important macroeconomic event | 05 June 2024

Events to watch out for today:

11:00 GMT+3. EUR - Composite PMI

17:00 GMT+3. USD - ISM Index of Business Activity in the Services Sector

EURUSD:

The EUR and USD pair is rising during the Asian session on Wednesday amid subdued US Dollar (USD) price action. Spot prices are currently trading just below 1.0900 and remain a short distance from the March 21 price level reached yesterday.

The incoming softer US macroeconomic data points to signs of a cooling economy and strengthens bets for an imminent interest rate cut by the Federal Reserve (Fed) this year. These expectations are keeping US Treasury bond yields low and undermining the US Dollar, which in turn provides some support for EUR/USD. However, upside opportunities are limited as traders may prefer to take a wait-and-see stance ahead of Thursday's important European Central Bank (ECB) monetary policy meeting.

As has been repeatedly reported in recent weeks, the ECB is likely to cut interest rates by 25 basis points following its June 6 meeting. This would be the first rate cut since March 2016 and would be accompanied by the latest economic forecasts. This data, as well as comments from ECB President Christine Lagarde, will be scrutinized for clues on future rate cuts amid a rise in eurozone inflation in May. This, in turn, will play a key role in the movement of the common currency and the EUR/USD pair.

Market attention will then shift to Friday's release of detailed monthly US employment data, known as the Non-Farm Payrolls (NFP) report. The crucial US employment data could influence expectations for the Fed's next policy path and the USD exchange rate. Ahead of a key central bank event and risks associated with US macroeconomic data, Wednesday's economic agenda, including the ADP report and ISM Services PMI, could create short-term opportunities for EUR/USD.

Trading recommendation: Trade mainly with buy orders at the price level of 1.0910. Consider sell orders at the price level of 1.0835.

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