EUR/USD holds above 1.0700 on weaker US Dollar, upbeat Eurozone PMI

The EUR/USD pair holds above the 1.0700 psychological barrier during the early Asian session on Wednesday. The weaker-than-expected US PMI data for April drags the Greenback lower and creates a tailwind for EUR/USD. Investors will take more cues from Germany’s IFO business sentiment index and Expectations, along with the US March Durable Goods Orders. 

Overall business activity in the Eurozone expanded at its fastest pace in almost a year in April, with a robust rebound in the bloc's major service sector, according to the HCOB's latest Purchasing Managers Index (PMI) survey released on Tuesday. The HCOB Eurozone PMI Composite improved to 51.4 in April from March’s reading of 50.3, better than the estimation of 50.8. The reading registered the highest level in nine months. 

Meanwhile, the bloc’s Services PMI hit a fresh eleven-month high, rising to 52.9 in April from 51.5 in March, beating market expectations of 51.8. The Eurozone Manufacturing PMI came in at 45.6 in April, compared to the 46.1 reading in March, weaker than the 46.5 expected. In response to the data, the Euro (EUR) attracts some buyers against the Greenback. However, the dovish stance of the European Central Bank (ECB) might limit the major pair’s upside. 

The ECB policymakers emphasized the need to cut interest rates multiple times this year, even though elevated US inflation delays a pivot to looser policy by the US Federal Reserve (Fed) and tensions in the Middle East keep oil prices high. The ECB President Christine Lagarde suggested that the central bank may cut its deposit rate from a record-high 4% in June, but has kept its options open for further action. 
 
On Tuesday, the US preliminary S&P Global Composite PMI, which tracks both the manufacturing and services sectors, fell to 50.9 in April from the previous reading of 52.1. Meanwhile, the Manufacturing PMI dropped to 49.9 in April from 51.9 in the previous reading, weaker than the estimation of 52.0. The Services PMI decreased to 50.9, compared to 51.7 prior, worse than the 52.0 expected. The reports indicated that business activity in the United States continued to expand in April, albeit at a softer pace than in March. The downbeat data weighs on the US Dollar (USD) and caps the upside of EUR/USD.