EUR/USD opened with a bullish gap on Tuesday (5/13) during the Asian session, trading near the 1.1110 level after losing more than 2.5% in the previous session. The currency pair faced challenges as the US Dollar (USD) strengthened on the back of progress in the United States (US)-China trade negotiations.

Over the weekend, the United States and China reached a preliminary deal in Switzerland aimed at significantly reducing tariffs, signaling a potential de-escalation in trade tensions. Under the deal, the US will lower tariffs on Chinese goods from 145% to 30%, while China will cut tariffs on US imports from 125% to 10%. This development has been well received by the market as a step towards stabilizing global trade relations.

Attention now turns to the upcoming US Consumer Price Index (CPI) report for April, due on Tuesday. Economists expect headline inflation to rise to 0.3% month-on-month from -0.1% previously, while core CPI is also projected to rise to 0.3% from 0.1%. On a yearly basis, both measures are expected to be unchanged.

Meanwhile, the euro (EUR) remains under pressure amid growing expectations that the European Central Bank (ECB) could extend its monetary easing cycle in response to declining inflation. Several ECB officials have hinted at further interest rate cuts, citing persistent trade uncertainty and a persistent disinflationary trend.

However, ECB Executive Board member Isabel Schnabel provided a more cautious perspective in a speech at Stanford University on Friday. She argued that current interest rates are appropriate and should remain in neutral territory. Schnabel also warned of the risk that medium-term inflation could potentially breach the ECB's 2% target due to ongoing global economic disruptions. (Newsmaker23)

Source: FXstreet