EUR/USD continues to trade close to the 1.36 line in Thursday’s European session. Today’s highlight is the ECB policy statement, with speculation swirling that the central bank will take monetary action. There was some good news out of the Eurozone as German Factory Orders hit a seven-month high, and Retail Sales beat the estimate. In the US, today’s major event is Unemployment Claims.
Here is a quick update on what’s moving the pair.
- EUR/USD was quiet in the Asian session, trading close to the 1.36 line. The pair has edged higher in the European session.
Current range: 1.3585 to 1.3650.
- Below: 1.3560, 1.3515 and 1.3475 and 1.34
- Above: 1.3650, 1.37, 1.3740, 1.3785, 1.3830, 1.3865, 1.3905, 1.3964 and 1.40
- On the upside, 1.3650 is the next resistance line. The round number of 1.37 follows.
- 1.3585 is immediate support. 1.3560 follows.
- 6:00 German Factory Orders. Estimate 1.3%, actual 3.1%.
- 8:10 Eurozone Retail PMI.
- 9:00 Eurozone Retail Sales. Estimate 0.1% actual 0.4%.
- Tentative – French 10-year Bond Auction.
- 11:30 US Challenger Job Cuts.
- 11:45 ECB Minimum Bid Rate. Estimate 0.10%.
- 12:30 ECB Press Conference.
- 12:30 US Unemployment Claims. Estimate 309 thousand.
- 14:30 US Natural Gas Storage. Estimate 116B.
- 17:30 US FOMC Member Narayana Kocherlakota Speaks.
*All times are GMT
- Markets await ECB move: ECB president Mario Draghi denied deflation concerns again and again, but changed his mind in the ECB conference this week. Noting that deflation was a serious threat and made it clear once again after the shock comment earlier in the month, that ECB action is imminent. A cut in interest rates seems obvious, while asset purchase and liquidity injections are additional tools available to the Draghi and his colleagues. Any one of these moves would likely have a strong impact on EUR/USD, which has retracted somewhat since testing the 1.40 level earlier in May. Is the ECB decision already priced in? Not so fast. Here is a recording of the webinar towards the event.
- EZ inflation is at rock bottom: Eurozone CPI Flash Estimate dipped to 0.5% in May, down from 0.7% a month earlier. The estimate stood at 0.7%. Core inflation dropped to 0.5%. April’s “Easter effect” on prices was short lived. These numbers are weak and at the lowest seen so far. German inflation numbers were even worse, as Preliminary CPI came in at -0.1%, its second straight decline. The persistently low inflation levels affecting the region are a serious threat to a recovery by the Eurozone economy, and have fuelled speculation that the ECB can no longer afford to ignore the situation and will take action at its Thursday policy meeting.
- ADP Nonfarm Payrolls slides: ADP Nonfarm Payrolls had been on an upward trend, but that ended on Wednesday, as the key employment indicator took a tumble. The indicator dropped to 179 thousand, well off the April reading of 220 thousand. The estimate stood at 217 thousand. The dollar held firm despite the weak reading, but the euro could gain ground if the official Nonfarm Payrolls release follow suit with a poor result on Friday. Later on Thursday, we’ll get a look at Unemployment Claims, with the markets expecting a slight rise in claims.
- US PMIs points upward: US manufacturing and services sectors are pointed in the right direction, according the ISM Business Survey Committee. The ISM Manufacturing and Non-Manufacturing PMIs both improved in May. There was some confusion earlier in the week, as the Manufacturing PMI was faulty, with the original report stating that the manufacturing index had softened in May. This was later corrected, as the index actually improved to 55.4 points in May, up from 54.9 points a month earlier. Meanwhile, the Non-Manufacturing PMI hit a nine-month high last month, climbing to 56.3 points, ahead of the estimate of 55.6 points.