The euro was trading sideways against the dollar in the early session as the euro-dollar remained above the 1.075 level.
The EUR/USD reacted positively as the Euro Area Service PMI came out better than market consensus at 53.3 points for April, surpassing March’s reading of 51.5 points.
Furthermore, the market continues to digest weaker-than-expected US data. The latter have fuelled expectations of interest rate cuts to start sooner with two cuts priced in for 2024.
The latest ISM surveys indicating contraction in manufacturing and services have raised doubts over the strength of the US economy while weaker-than-expected job market data prompted a change in views regarding the Federal Reserve’s monetary policy direction, supporting anticipations toward interest rate cuts.
However, the pair could continue to see some volatility as traders react to upcoming comments from the Federal Reserve governors in particular as monetary policy expectations have been swinging significantly lately.
Bond yields could remain under some pressure if monetary policy expectations continue to soften.
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