The EUR/USD was under negative pressure on Tuesday and moved south most of the day on a stronger dollar amid risk aversion and rising debt woes in the euro area.
After the boost the market received from the announced death of Osama Bin Laden the sentiment shifted to negative once more yet only remained in the favor of greenback, pressuring the EUR/USD to the downside.
Risk aversion intensified on Tuesday with losses to high yielding currencies, equities, and other assets as haven currencies including the dollar gained grounds on fear over reprisal attacks following Bin Laden’s death.
The euro sustained its losses and resisted the heavy decline against a strong dollar after the unexpected rise in producer price in March to an annual 6.7%, the fastest in two-and-a-half years, keeping the pressure on the ECB to raise rates again this year.
Nevertheless, debt fears are finding their way back into the market which undermines the capability of the ECB to move swiftly with a series of interest rate increases in the near-term which might disappoint investors that are turning very hawkish on the ECB.
ECB Vice President Victor Constancio said on Monday that the ECB has not decided to rush into a series of interest rate increases in comments to the European Parliament reminding again that the sovereign debt crisis has not abated.
The speculation on Thursday’s decision will be predominant for the pair’s movement on Wednesday, especially as we can see the markets turning pessimistic over the course of the global recovery ahead of the nonfarm payrolls on Friday and more key performance figures from across economies on Wednesday which might in role intensify risk aversion to the benefit of the dollar over the euro.
On Wednesday Germany starts at 07:55 GMT with the final PMI Services for April and expected unrevised at 57.5. From the euro area at 08:00 GMT the final Composite PMI and Services PMI are also expected unrevised for April at 57.8 and 56.9 respectively, nevertheless, we might see upside revision to the Composite gauge after the unexpected upside revision to the manufacturing index as far as services sector does not extend the slowing and turns with downside revisions.
Retail sales for the euro area follow at 09:00 GMT for March and expected with 0.1% rise following 0.1% drop though likely to remain low after we saw the nation’s sales drop on inflation and rising commodity prices which crunched spending.
From the US the focus will be on the first clue for the US jobs report. The ADP Employment Change is due at 12:15 GMT and expected to show 200,000 added private jobs after 201,000 thousand. At 14:00 GMT we have the Services PMI for April and expected higher at 58.0 from 57.3.
Written by ForexMansion.com