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  • Business activity in Germany’s manufacturing sector contracts in April.
  • US Dollar Index extends rebound, closes in on 98.
  • Coming up on Friday: Inflation data from the eurozone and the NFP from the U.S.

Following its 4-day long rally to a fresh two-week high of 1.1265, the EUR/USD pair reversed its direction and erased a large part of this week’s gains with the greenback capitalizing on the FOMC Chairman Powell’s optimistic remarks. As of writing, the pair is trading at 1.1180, losing 0.12% on a daily basis.

Earlier today, the data from Germany showed that the business activity in the manufacturing sector contracted with the IHS Markit’s Manufacturing PMI coming in at 44.4 and falling short of the market expectation of 44.5. Other data from Germany revealed that retail sales in March declined by 0.2% on a monthly basis. Although the Manufacturing PMI for the eurozone improved to 47.9 in the same period, it failed to help the shared currency recover its losses.

In the meantime, the greenback continued to outperform its rivals supported by the FOMC Chairman Powell’s optimistic remarks about the economic outlook and his view of inflation slowdown being temporary, which is taken as a sign that  the Fed is not seeing soft inflation as a cause for a rate cut. The US Dollar Index built on yesterday’s sharp rebound and rose to a daily high of 97.85 today.  

On Friday, the inflation report from the euro area, which is expected to show that the Consumer Price Index on a yearly basis rose to 1.6% in April from 1.4% in March, will be looked upon for fresh impetus before the U.S. Bureau of Labor Statistics publishes its highly-anticipated Nonfarm Payrolls (NFP) report.  

NFP leading indicators: ADP Employment report and ISM Manufacturing PMI hint mixed signals.

Technical outlook