EURUSD is under pressure above 1.0850 ahead of significant US economic events and the ECB’s monetary policy decision.

EURUSD struggles to stay above 1.0850 in Monday’s European session. The key currency pair is under pressure. After the updated HCOB Manufacturing Purchasing Managers Index (PMI) revealed. That manufacturing data fell slightly to 47.3, below the consensus and preliminary reading of 47.4.

The ECB is largely expected to announce interest rate reduction on Thursday.

This week, the shared currency pair is predicted to remain volatile. As investors await the European Central Bank’s (ECB) interest rate decision. Which will be revealed on Thursday. Financial markets believe that the ECB would lower its key Main Refinancing Operations Rate by 25 basis points (bps), to 4.25%. As a result, market players are increasingly interested in cues regarding the route of rate cuts after the June meeting.

Expectations that the ECB will lower interest rates again in July have dwindled after the Eurozone’s preliminary Harmonized Index of Consumer Prices (HICP) data for May revealed that the path to 2% inflation will be difficult.

Eurostat stated on Friday that the annual preliminary Eurozone HICP rose more than predicted in May. Headline HICP increased by 2.6%, exceeding expectations of 2.5% and the April reading of 2.4%. In the same era, the core HICP data—which removes volatile components Food, energy, alcohol, and tobacco consumption rose to 2.9%, exceeding expectations of 2.8% and the previous reading of 2.7%.

Daily Market movers: EURUSD falls as Eurozone PMI fails expectations.

The EURUSD is under pressure as investors await the ECB’s interest rate decision and the US Nonfarm Payrolls (NFP) report for May, which will be announced on Thursday and Friday. The labor market data will provide new information on when the Federal Reserve (Fed) may begin lowering interest rates.

According to the CME FedWatch tool, the probability of the Fed cutting interest rates at its September meeting has grown to 52%, up from 49% a week ago. Market speculation that the Fed will reduce interest rates in September improved following the Personal According to the Consumption Expenditures Price Index (PCE) data released on Friday, Personal Spending growth fell to 0.2% in April, down from 0.3% projections and the previous reading of 0.7%. However, core PCE inflation, the Fed’s preferred inflation metric, increased by 2.8% year on year, as expected.

Meanwhile, the US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, increased marginally to 104.70. Monday’s session will center on the US Institute for Supply Management (ISM) Manufacturing PMI data for May, which will be released at 14:00 GMT.

US NFP will provide new clues about when the Fed will decrease interest rates.

The ISM Manufacturing PMI is expected to have increased to 49.8 from 49.2. However, a value below 50.0 indicates a contraction in the sector. Investors will also focus. Other sub-components, such as the New Orders and Prices Paid indices, are key inflation indicators.