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Eurozone political uncertainty poses risks for Euro

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The EURUSD pair weakened near 1.0730, snapping the three-day winning streak during early European trading on Thursday, with the upside for the pair seeming limited as investors are worried about political uncertainty in the Eurozone.

Investors will closely watch the preliminary Eurozone and US Purchasing Managers Index (PMI) for June, which are due on Friday.

The cautious mood by the calling of a snap election in France after a defeat by the far-right National Rally raised fears of Eurozone political uncertainty and weighed on the Euro.

Furthermore, the divergence in monetary policy between the Eurozone and the US might further drag the shared currency lower.

On Wednesday, European Central Bank Governing Council member Mario Centeno said that the central bank can ease monetary policy further, so long as inflation continues to moderate.

Across the pond, the weaker US Retail Sales report suggested signs of subdued activity among US consumers, fueling the case for Federal Reserve rate cuts later this year, which is likely to weaken the Greenback in the near term.

However, the hawkish tone from several Fed officials might cap the Greenback’s downside.

Boston Fed President Susan Collins warned on Tuesday that it is still too early to say whether or not inflation is on course towards the Fed’s 2% target.

Meanwhile, Richmond Fed President Thomas Barkin said he needs to wait for several more months of economic data before considering cutting the interest rate.

(Source: OANDA)