The euro started the week with gains, with EUR/USD trading at 1.0727 during Monday’s European session, up 0.34% on the day. However, German Business Climate took a surprise dip, declining to 88.6 in June from 89.3 in May and missing the market estimate of 89.7. Business expectations also eased to 89.0 from 90.4 in May, indicating stagnation in the largest economy in Europe.
The German economy has been struggling, with inflation rates fluctuating. Germany’s inflation rate fell to a three-year low of 2.2% in March and April, before rising to 2.4% in May. The European Central Bank is closely monitoring the inflation picture in Germany and the Eurozone, hoping that inflation will gradually drop towards the 2% target. The ECB recently lowered interest rates and will be looking for sustainable evidence of inflation around the 2% level before considering further rate cuts at their upcoming meeting on July 18th.
In the US, there are no major releases on Monday, but attention will be on statements from two FOMC members, Christopher Waller and Mary Daly. The Fed has been hawkish, signaling only one rate cut by the end of the year compared to three earlier in the year. Concerns about inflation and a cautious approach to rate cuts have led to uncertainty in the markets, with an initial rate cut expected in September but not guaranteed.
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