EUR/USD continues to gain ground, after starting the week with strong gains. Currently, the pair is trading at 1.1249, up 0.06% on the day. Earlier in the day, the pair touched a high of 1.1277, its highest level since mid-April. On the release front, eurozone consumer inflation indicators disappointed. The estimate for annual inflation in May slowed to 1.2%, down from 1.7% in April. The core indicator also fell, dropping to 0.8%, after a reading of 1.2% in April. Both indicators missed their forecasts. There are no major events out of the U.S. On Wednesday, the eurozone releases retail sales, while the U.S. posts ADP nonfarm payrolls and ISM Non-Manufacturing PMI.
The week has started out with disappointing data in the eurozone. The estimate for consumer inflation slowed in May, a reflection of weaker economic activity in Germany as well as the rest of the eurozone. The downward slide continues for German and eurozone manufacturing PMIs, which have been mired in contraction territory for most of 2019. This is a result of ongoing trade tensions, which have reduced global demand for German and eurozone exports, and dampened the manufacturing sectors.
Despite soft eurozone data this week, the euro has gained ground, courtesy of FOMC member James Bullard. The president of the St. Louis Fed was blunt and pessimistic, saying that the Fed might have to lower rates shortly due to low inflation and the ongoing trade war with China. Bullard warned that the Fed may have to deal with “an economy that is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty“. Bullard added that the current benchmark rate, which is at a range of 2.25% to 2.50%, is too high for current economic conditions, and recommended lowering rates in order to stabilize the economy. The dovish comments about lower rates helped boost the euro on Monday.
