EUR/USD Rangebound as Market Watches Dovish ECB Members and Key Data Releases

EUR: Eyes on the doves

EUR/USD traded on the soft side yesterday, despite other pro-cyclical currencies finding some support. However, this appears to be mostly market noise and the pair may struggle to find clear direction before key US data are released later this week. Even then, our perception is that – barring major data surprises – the uncertainty surrounding a second hike by the Fed after July and the European Central Bank's hawkish message (which has offset weak eurozone data) can keep EUR/USD in a 1.08-1.10 range for longer.

Today, the eurozone calendar includes PPI numbers for May, some national industrial production data and final PMI readings for June. Those are normally non-market-moving releases. Some reaction could come from the consumer expectation survey, which includes inflation expectation figures. The focus will also be on ECB speakers: Joachim Nagel (who recently stuck to his hawkish rhetoric), plus some more dovish members (Ignazio Visco, Francois Villeroy de Galhau and Pablo Hernandez de Cos). Markets are pricing in 38bp of tightening by September and an alarming tone on core inflation from the doves might help markets fully price in that move