EUR/USD longs need data divergence
May 23 (Reuters) -EUR/USD erased most of it gains Thursday and neared flat on the session after upbeat U.S. data had more of an influence than euro zone numbers indicating improving economic growth.
EUR/USD's early rally was driven by May euro zone and German PMI reports as well as Q1 wage data indicating rising pay growth. The upbeat PMIs showed business activity increased while wage data fueled concerns inflation may be sticky.
The reports likely reinforce the case the ECB may not cut rates again after a widely expected easing move on June 6.
Upbeat U.S. data trumped those reports, however.
Weekly jobless claims indicated the jobs market remains robust while the upside surprise to May S&P Global PMIs showed business activity is picking up.
The data reinforced the view that Fed rate cuts may be more elusive than expected especially after minutes of the Fed's April 30-May 1 meeting showed some policymakers are willing to hike rates should inflation struggle to reach the Fed's 2% target.
The dollar's yield advantage over the euro increased on the reports. German-U.S. two year spreads US2DE2=RR widened, which helped drive EUR/USD towards key 1.0790-1.0815 support.
Investors are now focused on U.S. Q1 GDP second estimate, weekly claims and April PCE due next week.
Data indicating solid economic growth and jobs along with rising prices may drive EUR/USD downward.
For more click on FXBUZ
(Christopher Romano is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
