EUR/USD on verge of gains on weaker USD

by Jonathan Adams

The successive gains in EUR/USD are primarily credited to the downbeat performance of the US dollar

The selling tone surrounding the US dollar amid falling US Treasury yields keeps EUR/USD on the verge of daily gains. The pair remained defensive near the 1.2230 level for the past five sessions

The EUR/USD is trading at 1.2226, up 0.09% on the day.

The successive gains in EUR/USD are primarily credited to the downbeat performance of the US dollar.  The US Dollar Index, which tracks the performance of the greenback against the six majors, remained on the backfoot amid falling US Treasury yields. The tug of war between growth and inflationary concerns took a toll on the USD. The Fed reaffirmed tapering measures are not on cards despite the strong economic performance.

In addition to that, the divergence in Fed official’s comments about the timing of the ending the QE measures and rolling out of the current ultra-easy monetary policy also keep investors away from the US dollar.

The stronger economic data in the US, Eurozone, and UK improved the risk appetite and drove market participants towards riskier assets. The risk on market sentiment favours EUR/USD upside gains.

On the other hand, the single currency is boosted by the upbeat PMI data released on Friday. The IHS Markit Flash Eurozone Manufacturing PMI reached 62.8 in May, above the market expectations at 62.9. The Service PMI climbed to 55.5 in May, beating the market forecast of 52.3.

Meanwhile, European Central Bank (ECB) President Christine Lagarde shrugs off the expectation of winding up the bond purchasing program. Eurozone Finance Minister Paschal Donohoe remained optimistic about the economic recovery, but showed concerns about the challenges and not to fall behind China and the US. The comments hold back some of the gains for the EUR/USD pair.

The important data on the economic calendar to look out for would be the German IFO Business Climate for May. The US economic data consist of S&P/Case-Shiller Home Price, CB Consumer Confidence, and New Home Sales data.

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
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