The euro has inched lower on Monday, following sharp gains in the Friday session. Currently, EUR/USD is trading at 1.1180. It’s very quiet on the economic front, as there are no economic reports out of the eurozone or the US. In the US, we’ll hear from four FOMC members, and the markets will be looking for clues as to the Fed’s plans with regard to future rate hikes. On Tuesday, Germany and the eurozone will release Manufacturing PMI reports, as well as German Ifo Business Climate. In the US, the key release is New Home Sales.
There are no economic events in the US on Monday, so the markets will have a chance to focus on the Federal Reserve, with four FOMC members delivering speeches. The Fed has been keeping the markets on their toes in recent weeks regarding a rate hike. The central bank is expected to announce a rate hike at its June 14 meeting, but the odds of a hike have shown strong volatility. In late April, a rate hike was priced in at just 50%. The odds jumped higher in May but continue to show movement. Currently, the markets have priced in a hike at 78%, up from 73% on Friday. If the likelihood of a June move continue to fluctuate, the US dollar could also show some movement, as a rate hike will make US-dollar assets more attractive to investors.
The euro sparkled last week, as EUR/USD jumped 2.7 percent. On Friday, the euro gained one percent and punched past the 1.12 line for the first time since November. The US dollar was broadly lower, as President Trump endured one of his most difficult weeks since taking office. Trump’s administration was rocked by reports that he had asked former FBI director James Comey to end an investigation into connections between Russia and the Trump campaign team during the US election. If these accusations are true, Trump could be charged with committing obstruction of justice. President Trump fired back on Thursday, angrily denouncing this move as a ‘witch hunt’. The media and the Democrats have had a field day with Trump’s woes, and many Republicans are expressing unease with an administration that appears rudderless and is staggering from crisis to crisis. The ongoing turmoil in Washington has soured investors on the US dollar, and the euro has taken full advantage. However, with Trump out of the US on an official tour to the Middle East and Europe, the political tensions in Washington have receded, at least for now
