Forex snapshot

Mixed data from the eurozone sees the EUR/USD hover above $1.36, while GBP/USD has held its ground after the UK services PMI beat expectations.

Euro hovers above $1.36

The euro has lost ground to the US dollar today, trading at $1.3612, after the services sector in the eurozone slipped last month.

There has been mixed economic news from the eurozone as the revised gross domestic product figure was in line with expectations but the services PMI report missed analysts’ expectations. The minimal growth in the eurozone and the sliding services figures suggest the European Central Bank must loosen monetary policy.

As Alastair McCaig stated, traders are already pricing in some form of monetary easing. Mario Draghi has his work cut out for him as he must strike a balance between taking action while not using up all his options in one go. I suspect the monetary easing programme will be a gradual process.

If the euro goes below the recent low of $1.3591 the next support level down is $1.35. Should Mr Draghi leave the policy unchanged tomorrow the euro could head towards $1.3720.

Pound holds its ground

The pound is broadly unchanged versus the US dollar as the UK service sector report beats expectations.

The pound is trading at $1.6743 after the higher-than-expected services PMI figure for May pushed sterling back into the $1.6740-60 range, which it has been in since the start of the week. Traders will be focused on the Bank of England statement tomorrow after the Nationwide housing report showed house prices are now on a par with the pre-crisis level, and Mark Carney has already stated that a booming property market could be detrimental to the UK’s recovery. Mr Carney may use more hawkish language in light of the recent housing data, which could drive the pound towards $1.6820.

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