- An upward revision of Eurozone services’ activity has given a fresh boost to the Euro
- The US Dollar had bounced up in previous sessions, following strong US jobs data.
- US Services PMI and ADP employment are in focus on Wednesday.
EUR/USD has been capped at 1.1400 and is trading near 1.1380 at the moment of writing, as the positive impulse from Eurozone services activity faded. May’s Services PMI has been upwardly revised to a 49.7 reading from the previous 48.9, which triggered a positive reaction on most Euro crosses.
The pair had retreated from six-week highs at the 1.1455 area on Tuesday, with the US Dollar buoyed by an unexpected increase in US job openings. In Europe, a softer-than-expected Eurozone Consumer Prices Index (CPI) release left the path clear for the European Central Bank (ECB) to ease monetary policy further over the coming months.
The ECB opens a two-day monetary policy meeting, which is highly likely to conclude with a 25 basis points (bps) interest rate cut to be announced on Thursday. The main interest of the event will be on the ECB President Christine Lagarde’s ensuing press release to assess the chances of a pause in July.
Later in the American session, the US ISM Services PMI and ADP Employment Change figures will provide some guidance for the US Dollar, on a day when US trading partners are expected to submit their “best offers” to reach trade deals that, so far, remain elusive.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.20% | -0.16% | -0.04% | -0.04% | -0.13% | -0.20% | -0.13% | |
| EUR | 0.20% | 0.01% | 0.13% | 0.14% | 0.07% | -0.02% | 0.06% | |
| GBP | 0.16% | -0.01% | 0.08% | 0.12% | 0.06% | -0.03% | 0.04% | |
| JPY | 0.04% | -0.13% | -0.08% | 0.03% | -0.13% | -0.09% | -0.05% | |
| CAD | 0.04% | -0.14% | -0.12% | -0.03% | -0.09% | -0.16% | -0.09% | |
| AUD | 0.13% | -0.07% | -0.06% | 0.13% | 0.09% | -0.09% | -0.02% | |
| NZD | 0.20% | 0.02% | 0.03% | 0.09% | 0.16% | 0.09% | 0.07% | |
| CHF | 0.13% | -0.06% | -0.04% | 0.05% | 0.09% | 0.02% | -0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: Euro changes direction with US data and the ECB in focus
- The Euro reversed course after an unexpected revision of the Eurozone Services PMI data revealed that the sector’s activity contracted less than expected. Demand has remained weak, weighing on the overall reading. New business fell for the fourth consecutive month, but employment in the sector rose, and business confidence improved, according to the report.
- On Tuesday, the Eurozone CPI showed that inflation fell below the ECB’s 2% target, adding pressure on the Euro. Monthly inflation stalled in May, with the headline CPI rate down to a 1.9% year-over-year (YoY), against expectations of a 2% reading. Core inflation eased to 2.3% YoY, beyond the 2.5% expected.
- In the US, JOLTS Job Openings, a relevant employment gauge for the Federal Reserve (Fed), increased to 7.39 million in April, against expectations of a slight decline to 7.1 million and from March’s 7.2 million reading.
- April’s US Factory Orders resulted in a 3.7% contraction, which declined beyond the 3% expected, highlighting the negative impact of US President Trump’s trade policy on manufacturing activity.
- In the Eurozone economic calendar, the main focus is May’s final HCOB Services PMI reading, which is expected to confirm that the sector’s activity contracted to 48.9 in May, following five consecutive months of growth.
- During the US session, the focus will shift to the ADP Employment report, which will set the expectations for Friday’s all-important Nonfarm Payrolls release. The market anticipates an increase to 115,000 new payrolls in May, after April’s 62,000 reading.
- Beyond that, the US ISM Services PMI is likely to show some acceleration in business activity in May. These figures are expected to feed investors’ appetite for risk, which, over the recent weeks, has favoured the USD rather than the Euro.
Technical analysis: EUR/USD corrects lower after rejection at 1.1455
EUR/USD hit six-week highs at 1.1450 on Monday but failed to consolidate at those levels and has returned to the mid-range of the 1.1300s.
The immediate trend remains positive, but technical indicators in 4-hour charts are approaching bearish territory, and the US Dollar Index is gaining momentum. Correlation studies suggest that further correction is on the cards for the index on Wednesday.
The 1.1365 level is holding bears for now, with the next support areas at 1.1310 and the May 20 and 29 lows in the 1.1210 area. On the upside, immediate resistance is at 1.1410 and Tuesday’s high at 1.1455.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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