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The euro was seeing some volatility and was slightly negative during the early session, following three consecutive sessions of gains against the US dollar.
The euro has been steadily climbing against the greenback since mid-April. Traders now turn to the European Central Bank’s meeting and interest rate decision this week.
The bank is expected to cut its interest rate by 25 basis points. However, uncertainty remains regarding the next steps in monetary policy and potential additional cuts this year.
As a result, markets could react to the comments from President Lagarde as she could deliver new clues about the development of the European monetary policy. European bond yields could react significantly to new data while they have been rising since the beginning of the year.
Looking ahead, market focus will also be on the upcoming US labor market data, especially the nonfarm payrolls report, which could further shape expectations around the Fed’s monetary policy stance and consequently impact the euro-dollar pair. If US labor data indicates weakness, reinforcing expectations of a Fed rate cut in September, it could further support the euro against the greenback.
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