Euro weakens to daily low

The Euro (EUR) continues its decline against the US Dollar (USD) from Monday, causing EUR/USD to retreat to lows not seen in two days, hovering around 1.0660 on Tuesday.

The Greenback, on the other hand, manages to regain its strength and pushes the USD Index (DXY) to levels around the 105.70-105.80 band. This strengthening of the Greenback is attributed to a renewed decrease in risk appetite, especially in response to weaker trade data from China. The downward movement in the pair is also accompanied by a marginal uptick in both US and German bond yields.

Regarding monetary policy, markets expect the Federal Reserve (Fed) to keep policy unchanged. The potential for an interest-rate hike in December appears to have lost momentum, particularly after the latest FOMC gathering and Friday's publication of weaker-than-anticipated Nonfarm Payrolls data for October.

As for the European Central Bank (ECB), investors also favour an extended pause of its rate-hiking cycle, most probably until the second half of next year.

On the economic calendar, German Industrial Production contracted more than estimated at a monthly 1.4% in September and 3.7% vs. the same month of 2022. In addition, German Construction PMI receded to 38.3 in October. Looking at the broader eurozone, the Construction PMI ticked lower to 42.7 during last month and Producer Prices rose at a monthly 0.5% in September and dropped 12.4% over the last twelve months.

Across the Atlantic, Balance of Trade results showed a $61.5B deficit in September, while the IBD/TIPP Economic Optimism index and Consumer Credit Change are both due later in the session.

Additionally, market participants are expected to closely follow speeches by FOMC Governor Michael Barr (permanent voter, centrist), FOMC Governor Christopher Waller (permanent voter, hawk), NY Fed President John Williams (permanent voter, centrist), Dallas Fed President Lorie Logan (voter, hawk), Minneapolis Fed President Neel Kashkari (voter, centrist) and Chicago Fed President Austan Goolsbee (voter, centrist).