EUR/USD is showing limited movement in the Tuesday session. Currently, the pair is trading at 1.1316, up 0.04% on the day. On the release front, eurozone Sentix Investor Confidence declined by 3.3 points, missing the estimate of 2.3 points. This marked the sixth decline in seven months. The markets are braced for weak U.S. inflation reports. PPI is expected to come in at 0.1%, while core PPI is projected to post a gain of 0.2%. On Wednesday, Mario Draghi speaks at an ECB event in Frankfurt. The U.S. will post consumer inflation numbers.
The U.S. dollar has settled down, after a rough week. EUR/USD jumped 1.5% last week, on a combination of factors. First, comments from Federal Reserve president Jerome Powell have set the stage for a rate cut in the coming months. Since raising rates in December, the Fed has been neutral with regard to the direction of the next rate move, but rising trade tensions have raised fears of a slowdown in the U.S. economy. This has prompted the Fed to reconsider a rate cut later this year. The CME Group has projected a 64% likelihood of a 0.25% rate cut, up sharply from a month ago, when the odds of a cut were just 16%.
Secondly, there was dismal news on the employment front. Nonfarm payrolls posted its second dismal reading in four months. In May, the economy created only 75 thousand jobs, down from 263 thousand a month earlier. Wage growth was unchanged at 0.2%, shy of the estimate of 0.3%. Despite these soft job numbers, the U.S. labor market is in strong shape, and the greenback could quickly bounce back.
