EUR/USD continues to show limited movement this week. Currently, the pair is trading at 1.1203, up 0.03%. It’s a quiet day on the release front, so traders should not expect much movement from the pair on Tuesday. German factory orders posted a gain of 0.6%, ending a nasty streak of four straight declines. However, this reading was shy of the estimate of 1.6%. The EU released its economic forecasts of member states. In the U.S., the highlight is JOLTS Jobs Openings. On Wednesday, Germany releases industrial production and the ECB releases the minutes of its April policy meeting.
The week started with positive economic data, but the euro was unchanged on Monday. Eurozone services PMI have been stronger than manufacturing PMIs, and continued to point to expansion in April. German services PMI improved to 55.7, just above the estimate of 55.6. This marked the strongest score since September. The eurozone release dipped to 52.8, but still beat the forecast of 52.5. Eurozone Sentix Investor Confidence jumped to 5.3, well above the estimate of 1.1. As well, retail sales slowed to 0.0%, above the estimate of -0.1%.
With the eurozone continuing to post lukewarm data, the ECB is in no rush to alter its monetary policy. Rate-setters are in a dovish mood, and the bank recently stated that it had no plans to raise rates prior to the spring of March 2020. The U.S. economy is in much better shape, but the Federal Reserve has shifted to dovish stance so far this year. At last week’s rate meeting, Fed chair Powell said that rate moves could go either way. Economic data will play a major factor in what direction rates move. Recent numbers have looked strong – GDP for Q1 jumped 3.2%, and nonfarm payrolls was unexpectedly strong in April. If this positive trend continues, the Fed could raise rates later this year, and the divergence with the ECB would likely boost the dollar, at the euro’s expense.
