After a quiet start to the week, EUR/USD has posted considerable losses in the Wednesday session. Currently, the pair is trading at 1.1726, down 0.45% on the day. On the release front, German and eurozone PMIs missed expectations in the manufacturing and services sectors. In the US, the key event is the release of the Federal Reserve minutes from the May policy meeting. On Thursday, Germany releases Final GDP and GfK Consumer Climate, and the ECB will publish the minutes of its April policy meeting. The US will release unemployment claims and Existing Home Sales.
Weak PMI data in May has sent the euro lower in the Wednesday session, as the currency dipped below the 1.17 line for the first time since mid-November. Investors are particularly concerned that both German and eurozone manufacturing PMIs dropped for a fifth straight month. German Manufacturing PMI posted its weakest gain in 16 months, while the eurozone indicator posted its worst reading in 18 months. These numbers, while certainly disappointing, should not cause any alarm, as the PMIs continue to indicate expansion in the services and manufacturing sectors. Still, the fact that growth was softer than expected could give ECB policymakers reason to re-evaluate the planned wind-up of its stimulus program in September.
The Federal Reserve will be in the spotlight on Wednesday, as analysts pore over the minutes of the May policy meeting. The Fed did not raise rates at the meeting, but a strong US economy has raised expectations that the Fed will press the rate trigger in June – according to the CME Group, the odds of a June hike stand at 100%. The markets will be looking for some guidance from the May minutes, and if the message from Fed policymakers is hawkish, traders can expect the dollar to post gains against the euro and other major rivals.
