Euro recovery stalls

EUR/USD rebounds to 1.0770 in Tuesday’s early New York session. The shared currency pair is broadly sideways amid indecisiveness among investors due to the absence of high-tier data in the United States (US) and the Eurozone.  

The upside in the major currency pair stalled near 1.0800 as the US Dollar (USD) steadied after investors priced in weak US Nonfarm Payrolls (NFP) and ISM Services Purchasing Managers Index (PMI) data for April, which strengthened speculation for the Federal Reserve (Fed) reducing interest rates from the September meeting. The CME FedWatch tool shows that traders see a 67% chance for rates being lower than current levels in September, which has increased significantly from the 46% chance recorded a week ago. 

Despite declining confidence in the US economic outlook, Fed policymakers support keeping interest rates restrictive for a longer period due to the stubborn inflation outlook. On Monday, Richmond Fed Bank President Thomas Barkin said that risks to inflation are still on the upside, and demand must be hit to finish the battle against inflation. 

Recently, the Institute for Supply Management (ISM) reported significantly higher Price Paid Indexes for both Manufacturing and Services PMI. This suggests that businesses' prices paid for inputs rose significantly, which exhibits a stubborn outlook on price pressures. 

In the American session, Minneapolis Federal Reserve President Neel Kashkari also commented, "Inflation progress seen in the latter half of 2023 appears to have stalled; the question is whether disinflation is still underway or just taking longer."