Ella 
In early Asian trading on Monday, EUR/USD traded in a positive area near 1.0850 for the second consecutive day. A stronger-than-expected preliminary Eurozone Purchasing Managers Index (PMI) for May provided some support for the euro (EUR). However, potential interest rate cuts from the European Central Bank in the coming months may limit the upside for EUR/USD.
Stronger U.S. economic data and hawkish comments from Federal Reserve officials could fuel speculation that the easing cycle will be delayed this year. Investors are pricing in a 53% chance of a rate cut by the Fed in September, the CME FedWatch tool showed, down from 64% a week ago. Investors are awaiting preliminary data on the annualized rate of U.S. first-quarter gross domestic product (GDP) due to be released on Thursday. Gross domestic product is estimated to have expanded at an annual rate of 1.5% in the first quarter, up from 1.6% previously. If the US data is strong, it may boost the US dollar in the short term.
On Friday, U.S. durable goods orders rose 0.7% monthly in April, up from a downwardly revised 0.8% increase in March and stronger than expectations for -0.8%. Meanwhile, the University of Michigan consumer confidence index rose to 69.1 in May from 67.4 in April, better than expectations for 67.5. The University of Michigan’s five-year inflation forecast fell to 3% from 3.1%.
ECB policymaker Piero Cipollone said on Sunday that the time was ripe for a rate cut in June as recent data were moving in the right direction. Meanwhile, European Central Bank President Christine Lagarde said she was “confident” that inflation in the euro zone is under control and that a rate cut next month is a high probability. The European Central Bank is widely expected to cut borrowing costs in June, which could weigh on EUR/USD.
