- Business activity in US service sector expands at a surprisingly robust pace.
- US Dollar Index rebounds sharply from weekly lows on upbeat data.
- Factory orders in Germany continued to contract in July.
The EUR/USD pair capitalized on the broad-based USD weakness and build on Tuesday’s gains to reach its highest level since August 29 at 1.1084 today. However, the pair reversed its course in the second half of the day as the upbeat data from the US eased fears over a possible recession and helped the Greenback stage a sharp rebound. As of writing, the pair was virtually unchanged on the day at 1.1036.
Signs of life in US economy
The Automatic Data Processing (ADP) in its monthly publication reported that the private sector employment in the US increased 195,000 in August to beat analysts’ estimate of 149,000 and hinted at a strong Nonfarm Payrolls (NFP) reading this Friday.
More importantly, the Insitute for Supply Management (ISM), which reported a disappointing Manufacturing PMI earlier this week to trigger the USD sell-off, today announced that the Non-Manufacturing PMI in August improved to 56.4 from 53.7 in July. After slumping to a weekly low of 98.09, the US Dollar Index turned south and is now looking to close the day flat near 98.40.
On the other hand, today’s data from Germany showed that factory orders contracted by 2.7% on a monthly basis in July to remind investors of the slowdown in Europe’s largest economy. Commenting on the data, “The details showed shipments also down -1.0% during the month, and haven’t posted a monthly gain since January. As a result, we’ve downgraded our German Industrial Production forecast for tomorrow morning, and now look for a -1.0% monthly decline,” said TD Securities analysts.
On Friday, the Eurostat will release the gross domestic product (GDP) data for the eurozone. Later in the day, the NFP, which is expected to fall to 158K in August from 164K in July, will be looked upon for fresh impetus.
Technical levels to watch for
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