Euro to dollar rally | 07 May 2024

An event to look out for today:

15:30 GMT+3. EUR - Change in retail trade volume

EURUSD:

EURUSD broke its four-day winning streak, trading near 1.0760 during Asian hours on Tuesday. However, the euro found support in better than expected Eurozone Purchasing Managers' Index (PMI) data released on Monday. Later on Tuesday, retail sales data will be released in the upcoming European session. This data will provide a near-term view of the performance of the retail sector, which accounts for about 5% of the total value added in the Eurozone economy.

On Monday, Bloomberg reported that Philip R. Lane, chief economist at the European Central Bank (ECB). Lane said that the latest Eurozone data increased his confidence that inflation will return to the 2% target, and therefore increase the likelihood of the first interest rate cut in June.

In an interview with Spanish newspaper El Confidencial, Lane referred to last week's consumer price report, which showed that pressure in the services sector eased for the first time since November. Lane called the development "an important initial step in the next phase of lower inflation."

The eurozone's HCOB services PMI rose in April, showing the strongest growth in almost a year, beating the initial estimate. Stronger demand played a significant role in the increase, with new orders rising at the fastest pace since May last year.

Bloomberg reports that Richmond Federal Reserve (Fed) Governor Thomas Barkin said Monday that raising interest rates would further dampen U.S. economic growth and help ease inflationary pressures, bringing it closer to the central bank's 2% target.

Barkin also stressed that a robust labor market gives the Federal Reserve an opportunity to make sure inflation is consistently falling before considering lowering borrowing costs. However, he cautioned that persistent inflation in the housing and services sectors poses a risk of continued high levels of price increases.

The upward correction in the US dollar (USD) is putting pressure on EUR/USD. However, softer US employment data released on Friday revived hopes for a possible interest rate cut by the Federal Reserve (Fed) in 2024. This increased investors' appetite for risk and, as a consequence, depressed the US Dollar against the Euro.

Trading recommendation: Trade mainly with buy orders at the price level of 1.0790. We consider sell orders at the price level of 1.0745.

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