Euro up to start the week

EUR/USD is bouncing on Monday due also perhaps to profit-taking. The pair suffered a substantial decline at the end of last week, following the release of Eurozone and US flash PMI data that highlighted US exceptionalism.

The data suggested the US economy is still doing pretty well and the Federal Reserve (Fed) may be being too hasty in expecting to make three interest-rate cuts this year. If the Fed changes its mind and cuts rates more slowly, it will be positive for the US Dollar since higher rates tend to attract greater inflows of foreign capital.

Despite Monday’s bounce, the Euro remains “fragile” to further weakness, according to analysts at ING, who think the surprise Swiss National Bank (SNB) decision to cut its interest rates on Thursday has stimulated “increased scrutiny of ECB communication,” for signs the European bank will follow suit. The ECB and SNB have a history of mimicking each other, although it is normally the SNB which follows the ECB, not the other way around.

“Following last week's surprise cut from the Swiss National Bank, there has been increased scrutiny on ECB communication. This remains mixed, with one hawk on Friday still talking up the chances of an April rate cut. Notably, money markets still ascribe a very low probability to such an outcome and we doubt that changes much this week given the absence of key data,” said ING in a recent note.

ING still sees a low probability of an early interest rate cut by the ECB, however, and volatility is likely to be minimalized by the lack of key data out for the Euro this week and the upcoming Easter holidays.

The Federal Reserve Bank of Atlanta President Raphael Bostic is also scheduled to speak later in the day at 13:45 GMT, and is followed by the Federal Reserve member of the Board of Governors Lisa Cook at 14:30 GMT.On the data front, US New Home Sales and the Chicago Fed National Activity Index will be released on Monday.