Euro maintains positive trend, despite dollar rebound

EURUSD has drifted lower from Monday’s highs at 1.1450 and is moving at 1.1410 in Tuesday trading.

The Eurozone Consumer Prices Index (CPI) reading for May has shown lower-than-expected inflationary pressures, which gives leeway to the ECB for further monetary easing to support the region’s economy.

The headline CPI stalled in May and the yearly rate fell below 2% for the first time in eight months, following a 2.2% reading in April. The Core CPI was also flat on the month and eased to 2.3% on a year-to-year basis, from 2.7% in the previous month, beating expectations of a shorter decline. to a 2.5% rate.

Eurozone data released on Tuesday also revealed that the Unemployment Rate eased to 6.2% in April, as expected, following an upwardly revised 6.3% rate in March.

These figures will be welcomed by the European Central Bank, which is widely expected to cut interest rates for the eighth consecutive time on Thursday.

ECB President Christine Lagarde will stick to her neutral tone, assuring that further decisions will depend on data, but the market is likely to price further rate cuts down the road, adding some pressure on the Euro.

The US Dollar, on the other hand, remains unable to show a significant recovery. President Trump’s chaotic trade policy and growing concerns about fiscal stability are acting as headwinds to the greenback, and recent US data failed to provide any relevant support.

The DXY Dollar Index returned below the 100.00 psychological level last week and has kept languishing below the 99.00 level so far.

On Monday, US data showed that manufacturing activity deteriorated against expectations, with delivery times increasing. These figures confirmed the negative impact of trade uncertainty on the sectors’ activity and triggered fears of supply chain disruptions.