EUR/USD Rebounds on Weak US Data and Dollar's Loss of Momentum

Following the release of disappointing US data, the EUR/USD currency pair made a recovery and surpassed the 1.0900 level during the American trading session. The presence of US holidays on Monday might lead to a relatively calm market. However, the momentum of the US dollar is waning, and the upcoming employment data and the publication of the Federal Open Market Committee (FOMC) minutes will hold significant importance.

On Monday, economic data revealed a downward revision of the Eurozone June Manufacturing Purchasing Managers' Index (PMI), with the headline figure dropping to 43.4 from the initial estimate of 43.6. The Service sector data will be made available on Wednesday. Despite the weak figures, the European Central Bank (ECB) intends to raise interest rates at the next meeting on July 22, given the persistent high levels of inflation. Furthermore, the likelihood of another rate hike in September exceeds 50%.

A weaker US dollar on Monday contributed to the rebound of the EUR/USD pair from 1.0870 to 1.0935, as the released US data fell short of expectations. The ISM Manufacturing PMI declined from 46.9 to 46, contrary to the anticipated modest increase to 47.2. Moreover, the Prices Paid Index dropped from 44.2 to 41.8, while the Employment Index fell from 51.4 to 48.1.

The strength of the Dollar has been supported by hawkish comments from the Federal Reserve. The minutes of the latest Federal Reserve meeting will be released on Wednesday, and essential labor market data, including ADP, Jobless Claims, JOLTS, and Nonfarm Payrolls, are scheduled for Thursday and Friday. Should the data turn out to be weak, it could potentially dampen expectations of a rate hike by the Federal Reserve, although the market is presently anticipating a 25 basis points increase in July.