- EUR/USD holds favorable ground near 1.0890 on the weaker USD.
- United States ISM Manufacturing PMI came in weaker than anticipated, flat at 46.7 in November.
- ECB policymaker stated the central bank isn’t ready to consider reducing borrowing costs now but would consider it later on in 2024.
- Traders will concentrate on the German Trade Balance, ECB’s Lagarde speech.
The EUR/USD pair snaps its three-day losing streak during the early Asian trading hours on Monday. The rebound of the pair is backed by the weaker United States Dollar (USD) and lower United States Treasury bond yields amid speculation that the Federal Reserve (Fed) has reached its peak of the rate hiking cycle and will ease policy soon. EUR/USD currently trades near 1.0890, gaining 0.10% on the day.
The dovish remarks from Fed Chairman Jerome Powell on Friday dragged the Greenback lower. Powell’s statements provided some support for the sentiment that the Fed is done with the interest rate hiking cycle and will move to a easing posture in 2024. He added that it would be premature to conclude with confidence that the Fed has achieved an adequately restrictive stance or to speculate on when policy might be eased.”
The United States manufacturing sector remained subdued in November. The Institute for Supply Management (ISM) revealed on Friday that the United States ISM Manufacturing PMI came in weaker than anticipated, and remains flat at 46.7 in November. The Manufacturing Employment Index dropped to 45.8 from 46.8 in the previous reading. Prices Paid increased from 45.1 to 49.9 and the New Orders Index reached 48.3 in November versus 45.5 prior.
Elsewhere, an attack on an American warship and commercial vessels in the Red Sea on Sunday fueled the fear of escalating conflicts between Israel and Hamas. This, in turn, may enhance the safe-haven flow and benefit the USD against its rivals.
Across the pond, the European Central Bank (ECB) policymaker and Bank of France Governor Francois Villeroy de Galhau stated last week that the ECB is not ready to consider reducing borrowing costs now but would consider it later on in 2024. That being said, the downturn in inflation brings the ECB’s 2% inflation target back into clear focus for the first time since the summer of 2021, potentially signaling a change in monetary policy.
Later Monday, market participants will keep an eye on the German Trade Balance for October and ECB President Christine Lagarde’s speech. These events may provide a clear direction for the EUR/USD pair.
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