EUR/USD has fallen from 1.0705 to 1.0670 levels on the day, following the softer PMI reports from France and Germany. It reinforces the notion that the economic resilience in Q1 may be a short-lived one. And this may put pressure on the ECB to cut rates sooner rather than later in Q3 this year.
Looking at price action in EUR/USD, the pair is inching towards last week's low of 1.0667. That is one key short-term level to watch on the chart at least. Adding to that, there are large option expiries hanging at 1.0650-60 on the day. And that could offer some interest in holding a stronger downside break, at least until we get to US trading.
Besides the euro, bond yields are also slipping on the day after the softer PMI readings above. German 10-year bond yields are down 6 bps to 2.364% on the day. That is spilling over to US 10-year bond yields as well, which are down 2.2 bps now to 4.232%.
In turn, USD/JPY has been dragged down a bit from around 158.90 levels to 158.70-75 at the moment.
Going back to the euro, the odds for an ECB rate cut in September are now at ~86%. Meanwhile, traders are upping their rate cut bets for the remainder of this year to ~49 bps.
