- Data continues to support Euro (EUR) with PPI rising for first time in 5 years
- Eurozone service sector PMI & retail sales to show recovery continues
- US Dollar (USD) trades lower amid gridlock in Congress
- ADP payrolls to guide expectations for Friday’s non farm payroll
The Euro US Dollar (EUR/USD) exchange rate is trending higher for a second straight session on Wednesday. The pair settled on Tuesday +0.3%, above the key $1.18 level. At 07:15 UTC, EUR/USD trades +0.15% at US$1.1818.
Data from the Eurozone continues to be supportive of the common currency. In the previous session, the June producer price index (PPI) for the Eurozone rose for the first time in 5 years and at a quicker rate than expected. PPI, which measures inflation at wholesale level, rose 0.7% in June compared to May, up from -0.6% the previous month. This is an improvement on the 0.5% increase that analysts had pencilled in. The upbeat data lifted the euro.
Today attention is on the service sector for the Eurozone region. After strong manufacturing PMI data earlier in the week, investors will be keen to see whether the service sector is experiencing a similar momentum in its recovery. Analysts are expecting a strong reading of 55.1.
Retail sales are also expected to show another strong month as the recovery continues from May into June with 5.5% month on month increase forecast. A strong reading could help boost the Euro higher.
The US Dollar is trending southwards versus its major peers as Democrats and Republicans failed again to reach an agreement on a new rescue package. Whilst the two sides say they will agree a deal before summer recess starts on Friday, investors are less optimistic.
The gridlock in Congress overshadowed upbeat US factory orders, which jumped 6.2% month on month in June, indicating that the economic recovery in the US particularly in the manufacturing sector is on track.
Investor attention will remain on the US economic calendar with the release of ADP private payroll figures and ISM non-manufacturing data. These are important lead indicators ahead of Friday’s non-farm payroll report.
Expectations are for 1.5 million private jobs to have been created in July, down from 2.3 million created in June. The service sector is also expected to show a slight easing in activity at 55 in July, down from 57.1, although this remains firmly in expansion.