The Euro to Dollar rate reached a fresh three-month top of 1.0916 on Tuesday, a result of soft US data and declining oil prices, according to analysts.

“News that the ISM manufacturing survey fell below the 49 handle in May increased pressure on the greenback across the board, driving the US Dollar Index (DXY) back to 104. Thus, EUR-USD and GBP-USD accelerated their rebound back above 1.09 and 1.28, respectively,” said Roberto Mialich, FX Strategist at UniCredit Bank.

The ISM Manufacturing PMI dipped to 48.7 in May from 49.2, falling short of expectations for 49.6. 

Additionally, the Prices Paid component of the report stood at 57, down from 60.9 and under projections for a reading of 60, Pound Sterling Live reports.

“The US ISM manufacturing report came in generally weak, echoing the message pencilled in by last week’s soft US PCE report and Chicago PMI and offsetting the picture from the May manufacturing PMI,” according to Evelyne Gomez-Liechti, Rates Strategist at Mizuho.

Furthermore, oil prices fell by close to 4% at the beginning of the week as investors responded to news OPEC would resume hiking production as from October.

“These are all 'good' news for the Fed, which is likely waiting to see signs that the monetary policy tightening is having some effect. The data continues to paint a picture of a softer US economy, which backs up our view of a Fed cut later in the year,” Gomez-Liechti added.

The Euro has climbed to new multi-week highs against the Dollar just days before the European Central Bank's June policy meeting, where a 25-basis point interest rate cut is forecast. Analysts suggest that despite the ECB's rate adjustment, the Euro-Dollar exchange rate's ability to stay above 1.09 will largely depend on US economic data.

“Our bias for EUR/USD is that it could remain at the upper end of its 1.08-1.09 range this week, while softer NFP data could potentially be the catalyst for a move above 1.09,” stated Jesper Fjärstedt, Senior Analyst, FX Strategy, at Danske Bank.