The euro has ticked lower in the Monday session, as EUR/USD is currently trading at 1.1260. Traders can expect a quiet day from the pair, as German banks are closed for a holiday. In economic news, the German and Eurozone service sectors continue to expand.German Services PMI was unchanged in May, with a reading of 55.4, just above the forecast of 55.2 points. Eurozone Services PMI inched lower to 56.3, edging above the forecast of 56.2 points. In the US, today’s key event is ISM Non-manufacturing PMI, which is expected to drop to 57.1 points.
The Federal Reserve holds its policy meeting on June 14, and the odds of a quarter-point increase continue to climb. The odds of a hike have climbed to 96%, according to the CME Group, up from 88% just a week ago. The markets have priced in a June move, and a dismal Nonfarm Payroll report has failed to put a dent in market confidence in a June rate hike. Traders should note that ahead of the March hike, the odds of a rate hike were also close to 100%, and the dollar actually lost ground after the Fed followed through with a quarter-point increase. An increase in interest rates represents a vote of confidence in the US economy, but the Fed continues to have some concerns. Inflation remains stubbornly low, despite a labor market that remains close to capacity. Fed policy makers are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets are skeptical, with the odds of a September rate hike at just 26%.
