EUR/USD gains traction above 1.0660 ahead of the Eurozone, US PMI data

• EUR/USD gains momentum to 1.0670, the highest in one month due to the weaker USD.
• The preliminary Eurozone Consumer Confidence for October came in at -17.9 vs. -17.8 prior, better than expected.
• The Chicago Fed National Activity Index suggests the US economy is still some distance from a recession.
• Market players await the Eurozone October PMI, and US S&P Global PMI on Tuesday.

The EUR/USD pair surges above the mid-1.0600s during the early Asian trading hours on Tuesday. The uptick of the major pair to the highest level in one month is bolstered by the correction of the US Dollar. At press time, EUR/USD is losing 0.01% on the day to trade at 1.0670.

Meanwhile, a decline in the US Treasury bond exerts selling pressure on the US dollar (USD). The 10-year Treasury yield reaches 5.02% for the first time since 2007, but then reverses its course, falling to 4.848%. The US Dollar Index (DXY) drops to a one-month low of 105.60.

On Monday, the preliminary Eurozone Consumer Confidence for October came in at -17.9 from the previous reading of -17.8, better than the market consensus of -18.3. Apart from this, the economists polled by Reuters anticipate the ECB’s rate hiking cycle is over, but it won't be until at least July 2024 before it begins easing as the battle against elevated inflation rattles on.

On the USD's front, the Chicago Fed National Activity Index rose to +0.02 in September versus -0.22 prior. A zero value for the index indicates the economy is growing at trend. A value of zero for the index implies that the economy is expanding at its current rate. The figure suggests the US economy is still some distance from a recession.

The Federal Open Market Committee (FOMC) enters its blackout period. Atlanta Federal Reserve (Fed) President Raphael Bostic said on Friday that he doesn't think that the US central bank will cut the rate before the middle of next year. Fed Philadelphia President Patrick Harker reiterated his preference to keep interest rates unchanged. While Fed Cleveland President Loretta Mester said the US central bank is "at or near the peak of the rate hike cycle. According to the CME FedWatch Tool, the markets don’t see the probability of a November rate hike, but the odds for January 2024 remain over 30%.

Market participants will monitor the preliminary Eurozone October PMI. In Germany, the German GfK Consumer Confidence Survey and PMI data are also due, followed by ECB’s President Lagarde speech on Tuesday. ECB has scheduled its monetary policy meeting on Thursday, with no change in interest rates is expected. On the US docket, the US S&P Global PMI will be released on Tuesday.