EUR/USD Gains Ground Amid Mixed US Data

EUR/USD continued its ascent on Thursday, climbing above 1.0700 as it extended its recovery from the April lows of 1.0601. A backdrop of mixed US economic indicators has weighed on the US Dollar (USD), while the Euro (EUR) found support from robust services-sector data.

The recovery of EUR/USD commenced on Tuesday following the release of preliminary US PMI data for April, which revealed an unexpected moderation in business activity. This suggested that the US economy might be feeling the impact of higher interest rates.

Wednesday saw the US Census Bureau reporting a 2.6% month-on-month increase in Durable Goods Orders for March, surpassing expectations. However, the positive data failed to significantly influence the USD, possibly due to the market already factoring in such developments or considering the series’ volatility.

Analysts at Commerzbank noted that the US Dollar’s reaction reflected the market’s adjustment of expectations regarding future interest rate trajectories. The consensus has shifted towards a delay in potential rate cuts by the Federal Reserve (Fed), which has already been fully priced in. Consequently, the USD has become more susceptible to negative news than positive developments.

The Euro’s stability is underpinned by robust Services PMI data, bolstering expectations of inflation in the services sector. This dynamic could influence the European Central Bank (ECB) as it deliberates on interest rate adjustments. While a rate cut in June appears likely, ECB Vice President Luis de Guindos indicated caution, emphasizing the need for sustainable inflation reduction. His ECB counterpart, Bundesbank President Joachim Nagel, echoed this sentiment, highlighting persistent services-sector inflation driven by robust wage growth.

Amidst these developments, EUR/USD maintains its upward trajectory, buoyed by diverging economic indicators between the Eurozone and the United States.

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