EUR/USD extends recovery near 1.0840 on weaker US Dollar
- EUR/USD recovers to 1.0840 amid the weaker US Dollar.
- The US ISM Services PMI eased to 51.4 in March from 52.6 in February, weaker than expected.
- Eurozone HICP inflation fell further than expected in March, triggering the possibility that the ECB will cut rates in June.
The EUR/USD pair extends recovery and flirts with the 100-day Exponential Moving Average (EMA) around 1.0840 on Thursday during the early Asian session. The sell-off in the USD Index (DXY) to 104.00 support after the weaker-than-expected US March ISM Services PMI data provide some support to the major pair. Investors await the final HCOB Services PMIs in Germany and the euro area, along with the US February Balance of Trade and weekly Initial Jobless Claims.
Business activity in the US service sector expanded slower in March. According to the Institute for Supply Management (ISM) on Wednesday, the US Services Purchasing Managers Index (PMI) eased to 51.4 in March from 52.6 in February, weaker than the expectation of 52.7. A measure of prices paid by businesses for inputs dropped to a four-year low, coming in at 53.4 versus 58.6 prior. In response to the data, the US Dollar (USD) faced some selling pressure and dropped to 104.25.
Additionally, data released from Automatic Data Processing (ADP) revealed that private sector employment in the US rose by 184K in March from the 155K increase (revised from 140K) in February, above the market consensus of 148K.
On the other hand, the Eurozone annual rate of inflation fell further than expected in March, triggering the possibility that the ECB will cut interest rates in June. ECB policymaker Pablo Hernandez de Cos said on Wednesday that he is not explicitly giving forecasts on future monetary policy, but recent inflation data is compatible with our mandate of an inflation objective. He added that the ECB could start cutting interest rates in June after a continued slowdown in inflation in the bloc. Meanwhile, the ECB policymaker Robert Holzmann said the central bank could start cutting interest rates in June as inflation may fall quicker than expected, but should not get too far ahead of the US Fed.
On Wednesday, the Eurozone annual Harmonized Index of Consumer Prices (HICP) climbed 2.4% in March, easing from a 2.6% increase in February, missing the market estimation for a 2.6% rise in the reported period. However, the impact on the Euro following the Eurozone inflation data has been marginal.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
