Ella 
EUR/USD hovered around 1.0750 during the Asian session on Tuesday after plunging in the previous session. A hawkish speech from U.S. Federal Reserve Chairman Jerome Powell, coupled with improved U.S. ISM service sector data, triggered a fall in EUR/USD.
The ISM Services Purchasing Managers’ Index (PMI) of the United States in January recorded 53.4, higher than the expected 52.0 and the previous value of 50.5. In addition, the ISM services employment index rose to 50.5 from the previous value of 43.8.
Federal Reserve Chairman Jerome Powell stressed the importance of keeping a close eye on inflation as it continues to move toward its core 2% target. This stance has caused US Treasury yields to rise, putting downward pressure on the EUR/USD pair. The market reaction reflected increased confidence in a stronger U.S. dollar amid signs that the Federal Reserve’s monetary policy stance is becoming more accommodative.
In addition, the European producer price index (PPI) data released on Monday was weak, putting the euro (EUR) under greater downward pressure. The European Union (EU) is facing a deflationary trend, which may prompt the European Central Bank (ECB) to consider easing monetary policy. The Organization for Economic Co-operation and Development (OECD) expects inflation across Europe to remain above the European Central Bank’s 2% target until sometime after 2025.
In December, the euro zone’s PPI fell by 10.6% on an annual basis, exceeding the expected decline of 10.5% and the previous value of 8.8%. The monthly PPI rate fell by 0.8% as expected. The previous value was a decrease of 0.3%.
