The EURUSD exchange rate fell by 100 pips following the release of US ISM services data on Wednesday. European GDP data is due to be released later in the week, and could provide further direction for the currency pair.
EURUSD: Daily Chart
The euro-to-US dollar exchange rate (EURUSD) fell from 1.08 to 1.07 and may gravitate towards the 1.064 resistance level if the economic growth data is weaker than expected.
The US dollar received a boost after stronger-than-expected ISM services data from the US economy. The fastest pace of rate hikes in decades had temporarily slowed activity in the services sector, but the ISM services index rose to a six-month high in August as the price-paid measure climbed for a second straight month.
The US dollar rose and expectations of further rate hikes increased as traders interpreted the strong ISM Manufacturing Index reading as a sign of continued economic strength. The index rose to 54.5 in August, its fastest pace since February. The gains were broad-based, with new orders, employment, prices, and production all increasing at a faster pace in August.
Services purchasing managers continue to describe the labour market as tight, stating that “the labour market remains very competitive.” This indicates that wage growth will continue to be supported and will be a challenge for the Federal Reserve.
European shares fell for a sixth straight day on Wednesday as German industrial orders fell more than expected, raising fears of a further slowdown in the region’s economy.
“The market is focusing on the prospects of a continued weakening in the macro momentum within Europe and even the prospect of a mild recession in the coming quarters,” said Thomas McGarrity, head of equities for RBC Wealth Management.
The European economy will face another test on Thursday with the release of third-quarter GDP data for the eurozone. A weak number, which could be foreshadowed by German data, could see the euro test lower support.