The most spectacular action occurred in the foreign exchange market. The EUR/USD currency pair showed great bullish power, breaking out beyond the daily high of 1.1400 psychological level. The Australian Dollar experienced headwinds, declining against the US Dollar. All of these positive developments played out to a backdrop of a slew of disappointing macroeconomic data last week from the US, increasing risk aversion in EM.
On Wednesday, the EUR/USD currency pair integer breached above the 1.1400 handle. Futures climbed as investors digested weaker-than-expected economic reports, sending it to flirt with daily highs. The ISM Services Employment Index dropped to 50.7, a miss from the expected 52.3. This sudden drop in usage has rattled confidence in the US economy.
“EUR/USD flirts with daily highs past 1.1400 on weak ISM data.” – FXStreet
The Australian Dollar started the day with modest gains. For the most part it stayed up in part due to buoyant economic data from Oz quickly overshadowed by the ever-strengthening US Dollar. The AUD/USD currency pair was technically able to maintain strong bullish momentum in the face of all that.
The US Dollar held on broadly as participants waited for the ISM Services PMI to cross the wires. This was a recipe for hype around potential dovish turns in monetary policy following the disappointing ADP report. This report, along with the ISM Services PMI, indicated that the US services sector is struggling more than predicted in May.
“Australian Dollar remains subdued as US Dollar holds ground ahead of ISM Services PMI.” – FXStreet
In other currency moves, GBP/USD climbed up toward 1.3560, setting daily highs as traders digested the most recent economic data prints. The Greenback came under heavy pressure immediately following the release of the ADP report. Another contributor to this decline was the ISM Services PMI, which missed market expectations.
Gold prices were mostly steady, hovering near the $3,360 per ounce troy mark. Against the backdrop of this mixed economic data, the market reaction that followed, the precious metal remained range-bound.
“Gold remains range-bound near $3,360 post ISM PMI.” – FXStreet
As market participants anxiously await improving economic indicators, speculation builds about the next step to be taken by monetary policy makers. Most analysts are looking to see what these opening salvos will mean for future central banks’ decisions.
“Why is the ECB set to cut interest rates again and what does that mean?” – FXStreet