GBP/EUR: Pound Steady vs. Euro As Angela Merkel Steps Down
  • Euro (EUR) extends losses after ECB’s Philip Lane expresses concern over Euro strength
  • Spanish service sector activity contracts to 47.7 in August vs 51.9 in July
  • US Dollar (USD) advances versus major peers
  • ISM non-manufacturing report in focus after ADP payrolls missed forecasts

The Euro US Dollar (EUR/USD) exchange rate is edging lower for the third straight day. The pair settled on Wednesday -5% lower at US$1.1853. At 07:30 UTC, EUR/USD trades -0.3% at US$1.1817, after briefly piercing through US$1.18.

The Euro is under pressure and has been extending its retreat from $1.20; a selloff which had started on Tuesday after ECB’s Chief Economist Philip Lane said the euro-dollar rate does matter. His comments hinted at concerns over the recent strength of the Euro, which had been trading at 2 year highs. Philip Lane’s comments coincided with inflation unexpectedly turning negative. The Euro hasn’t been able to find its footing since.

Service sector data is in focus today. Adding pressure to the Euro, data revealed that Spanish service sector activity shrank in August, ending two months of recovery. The PMI dropped to 47.7 in August from 51.9 in July. The level 50 separates expansion from contraction.

The data dashes hopes for a V shaped recovery in Spain’s services. New outbreaks of coronavirus infections and travel restrictions have mean that the summer tourist season, on which the Spanish economy is heavily reliant, never really took off.

Attention will now turn to the Eurozone service sector PMI. Expectations are for the sector to confirm expansion.

The US Dollar is moving higher versus its major peers, extending yesterday’s gains despite disappointing ADP payroll data. The ADP revealed that 428,000 jobs were created in the private sector in August. This was substantially below the 950,000 hires in the private sector that were forecast. Furthermore, the figure doesn’t bode well for Friday’s non-farm payroll report.

Attention will now turn to the ISM non-manufacturing report. The gauge is expected to decline to 57, down from 58.1. Investors will be looking closely at the employment component of the report, which is expected to decline, stacking the odds up that Friday’s jobs report will be disappointing.