The US Dollar (USD) traded defensively at the beginning of the week, providing extra wings to the risk-associated universe and encouraging EUR/USD to add to its ongoing recovery and approach the key 1.0900 barrier.
EUR/USD flirted with monthly highs around 1.0890. The Greenback lost further impetus along with US yields. The US ISM Manufacturing PMI disappointed expectations in May. The US Dollar traded defensively at the beginning of the week, providing extra wings to the risk-associated universe and encouraging EUR/USD to add to its ongoing recovery and approach the key 1.0900 barrier.
Looking ahead, the incipient recovery in some economic fundamentals in the Eurozone, coupled with the loss of momentum of the US economy, reinforce the narrowing of the gap between the Fed and the ECB monetary policy, therefore favouring the rebound in EUR/USD. However, in the longer run, given the rising likelihood of the ECB reducing rates before the Fed, the potential for further weakness in EUR/USD should be considered in the next few months.
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