EUR/USD bounces back strongly as market sentiment improves

The EUR/USD pair recovers strongly from a weekly low of 1.0670 in Monday’s European session. The major currency pair bounces back as the appeal for risk-sensitive assets improves amid growing speculation that the Federal Reserve (Fed) will start reducing interest rates in the September meeting and will deliver two rate cuts this year.

S&P 500 futures have posted some gains in the London session. 10-Year US Treasury yields remain sluggish near 4.25%. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, corrects from the seven-week high of 105.90.

On Friday, the US Dollar (USD) performed strongly after the preliminary S&P Global PMI report for June showed that overall economic activity surprisingly expanded. Flash United States (US) Services business activity expanded to 26-month high at 55.1. The Manufacturing PMI rose to three-month high at 51.7.

Though the US Dollar corrects from seven-month high, its near-term appeal has improved. Where all major economies failed to meeting PMI estimates, the US economy surprisingly expanded at a faster pace than their prior release.

Meanwhile, the Euro delivers an upbeat performance against its peers in Monday’s session as investors digest political uncertainty in France ahead of  thefirst legislative elections round scheduled for June 30.

The Euro recovered despite the preliminary HCOB PMI report for June pointing to a slowdown in the Eurozone economy. Both Manufacturing and Services PMIs were weaker than expected, which has boosted expectations of subsequent rate cuts by the European Central Bank (ECB).