EUR/USD edges lower to near 1.0750 due to the upward correction in the US Dollar

EUR/USD snaps its four-day winning streak, trading around 1.0760 during the Asian hours on Tuesday. However, the Euro found support from higher-than-expected Eurozone Purchasing Managers Index (PMI) data released on Monday. Later on Tuesday, Retail Sales data are set to be released during the upcoming European market session. This data will provide insights into the short-term performance of the retail sector, which contributes approximately 5% to the total value added by the Eurozone economies.

On Monday, Bloomberg report, European Central Bank (ECB) Chief Economist Philip R. Lane stated that recent Eurozone data have increased his confidence in inflation returning to the 2% goal, consequently raising the likelihood of a first interest-rate cut in June.

In an interview with Spanish newspaper El Confidencial, Lane referred to a report on consumer prices last week, which indicated that pressures in the service sector eased for the first time since November. Lane described this development as "an important initial step in the next phase of bringing inflation down."

In April, the HCOB Eurozone Services PMI saw an increase, indicating the strongest growth in nearly a year, surpassing the initial estimate. Increased demand played a significant role in the higher output, with new business volumes expanding at the fastest rate since May of the previous year.

In the United States (US), Bloomberg reported that Richmond Federal Reserve (Fed) President Thomas Barkin stated on Monday that elevated interest rates will further dampen economic growth in the United States (US) and help alleviate inflation pressures, bringing them closer to the central bank's 2% target.

Barkin also highlighted that the robust labor market provides the Federal Reserve with the chance to verify that inflation is consistently declining before contemplating reductions in borrowing costs. However, he cautioned that persistent inflation in the housing and services sectors poses a risk of maintaining elevated price increases.

The upward correction in the US Dollar (USD) exerts pressure on the EUR/USD pair. However, the softer US labor data released on Friday has reignited hopes for potential interest rate cuts by the Federal Reserve (Fed) in 2024. This has boosted investors' risk appetite, consequently undermining the Greenback against the Euro.