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4 June 2024 | FXGT.com

EUR/USD Climbs to 6-week High as US Economy Shows Signs of Slowing

EUR/USD Hits New Highs: The EUR/USD pair climbed to its highest level since March, surpassing the $1.09 mark during the early hours on Tuesday. This follows a three-day winning streak for the euro, driven by signs of a slowing U.S. economy.

Impact of US ISM PMI Data: Monday’s disappointing US ISM PMI data highlighted a slowdown in manufacturing activity, reinforcing expectations for a Federal Reserve rate cut later this year. This put pressure on the US dollar and supported the rise in the EUR/USD pair.

Cautious Market Sentiment: Despite the upward movement, traders remain cautious ahead of the European Central Bank meeting on Thursday. Investors are looking for guidance from ECB officials and the latest economic projections, especially considering rising Eurozone inflation in May. This event is expected to act as a catalyst for further directional moves for the EUR/USD.

ECB Rate Expectations: Expectations are high for a 25-basis point cut from the ECB this week. The European economy has struggled with near-zero GDP, making a rate cut likely, to support economic activity. Eurozone inflation has been a concern, but recent progress in controlling prices has allowed room for potential rate cuts.

Upcoming Data Releases: Traders are keeping an eye on today’s US macroeconomic data, including JOLTS Job Openings and Factory Orders, for additional short-term trading opportunities. Key highlight of the week will be the US Non-farm payrolls report on Friday. These data points could influence market sentiment and provide further clarity on the economic outlook.

Fed’s Policy Outlook: The Federal Reserve’s next policy meeting concludes on June 12th, coinciding with the release of consumer price data. Analysts do not expect a policy change at this meeting, but officials will update their economic and interest-rate projections. The persistent high-interest-rate policy of the Fed is under scrutiny, and the upcoming U.S. payroll data on Friday will be closely watched for signs of economic strain.

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