The Euro remained steady against the US Dollar on Tuesday, with the EUR/USD pair trading at 1.1420, as economic data from both the US and Eurozone failed to significantly move the market [1]. The US Dollar was supported by speculation that the Federal Reserve may raise interest rates, with the US Dollar Index (DXY) rising 0.06% to 101.17 [1]. Money markets have priced in 35 basis points of policy tightening by the end of the year, with a 66% chance of a rate hold at the July meeting and an 82% chance of a hike to the 3.75%-4% range at the September 16 meeting, according to Prime Terminal data [1].
US economic data showed job vacancies unexpectedly increased in May, and the Conference Board Consumer Confidence index edged higher in June, despite concerns about the jobs market [1]. Cleveland Fed President Beth Hammack indicated she may support higher rates if inflation does not ease [1]. The upcoming June jobs report is highlighted as a key event, with economists expecting 110,000 jobs added and unemployment steady at 4.3% [1].
In the Eurozone, inflation data from France, Italy, and Germany came in cooler than expected, which acted as a headwind for the Euro [1]. European Central Bank (ECB) officials gave mixed signals: Chief Economist Philip Lane advised against pre-committing to rate moves in July or September, while ECB’s Dolenc advocated patience until September [1]. Kazaks saw no need for a forceful inflation response, Nagel said it was too early for further hikes, Rehn was neutral, and Wunsch supported another rate hike [1]. Money markets priced in a nearly 60% chance of a 25 basis point ECB rate hike in September, but the central bank is expected to hold rates unchanged in July [1].
Geopolitical tensions eased as the US and Iran prepared to continue negotiations, improving risk appetite and supporting US equity markets, which ended the first half and second quarter on a positive note [1].
CONCLUSION
The Euro's performance was muted as diverging monetary policy expectations between the Fed and ECB kept the EUR/USD near 1.1400. While US data and Fed rate hike bets supported the Dollar, cooler Eurozone inflation and cautious ECB commentary weighed on the Euro. Markets are now focused on the upcoming US jobs report and central bank meetings for further direction.