On turnaround Tuesday, the single currency now loses momentum and forces EUR/USD to recede to the sub-1.0800 region, or 2-day lows.
EUR/USD Weaker Post-Pmis, USD-Buying
EUR/USD now leaves behind two consecutive sessions with gains and refocuses on the downside of mixed results from advanced PMIs in Germany and the broader Euroland for May.
On the latter, while the manufacturing sector remained weak, the services industry maintained its healthy momentum and is expected to have improved further this month.
In the meantime, US debt ceiling talks are predicted to keep ruling the sentiment in the global markets in the very near term. At the same time, speculation of further rate hikes by the ECB at its meetings in June, July, and probably September remains on the rise.
Across the pond, flash Manufacturing and Services PMIs for May are also due, along with New Home Sales and the speech by Dallas Fed L. Logan.
What To Look For Around EUR
EUR/USD struggles to reclaim further ground and trades vacillatingly around the critical 1.0800 zone.
The movement of the euro’s value is expected to mirror the behaviour of the US Dollar closely. It will likely be impacted by any differences in approach between the Fed and the ECB regarding their plans for adjusting interest rates.
Moving forward, hawkish ECB-speak continues to favor further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.
Key events in the euro area this week: Germany, EMU Advanced Manufacturing/Services PMI (Tuesday) – Germany IFO Business Climate (Wednesday) – Germany Final Q1 GDP Growth Rate, GfK Consumer Confidence (Thursday) – Italy, France Consumer Confidence (Friday).
Eminent issues on the back boiler: Continuation of the ECB hiking cycle in June and July (and September?). Impact of the Russia-Ukraine War on the region’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.
EUR/USD Levels To Watch
So far, the pair is losing 0.20% at 1.0791 and faces immediate contention at 1.0759 (monthly low May 19), seconded by 1.0712 (low March 24) and finally 1.0516 (low March 15). On the upside, a break above 1.0872 (55-day SMA) would target 1.1000 (round level) en route to 1.1095 (2023 high April 26).