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EUR/USD has been retreating amid intensifying Sino-American relations as speculation about the next central bank moves stands out, Yohay Elam, an analyst at FXStreet, briefs.

Key quotes

“The main point of contention is Hong Kong as pro-democracy activists plan another day on the streets in protest against China’s new security law – which may become even tighter. American lawmakers are moving forward to certify that the city-state is not autonomous and to slap sanctions.” 

“Markets seem somewhat more optimistic about coronavirus. Falling numbers in both America and Europe, gradual steps to reopen economies, and additional vaccine efforts are keeping the mood upbeat.”

“The ECB may opt to expand PEPP to as much as €1 trillion from the current €750 billion. Another topic is relaxing its capital key limits, enabling it to focus on countries in higher need such as Italy rather than buying debt according to member states’ economic output.” 

“The Conference Board’s consumer confidence figure stood at 86.6 points in May, marginally below expectations. New Home Sales surprised to the upside with 623,000 annualized in April.”

“Later in the day, the Fed releases its Beige Book. The Fed’s next meeting is in two weeks and pressure to set negative interest rates has waned. Similar to the ECB, the Fed has also been urging elected officials to act, yet another move may take time.”