EUR/USD drops to a new one-week low as bearish downtrend resumes
The bearish momentum for EUR/USD continued. The latest round of selling pressure followed a decision by Germany’s top constitutional court.
EUR/USD stays under pressure following German legal ruling
EUR/USD stayed on its current downtrend during Wednesday trade in Asia, following another sell-off in global markets.
After briefly pushing above $1.10 on Friday, the euro posted its third straight daily fall and as UK traders stepped to the desk on Wednesday morning, EUR/USD was treading water just above $.1082.
The bearish trend follows a decision by Germany’s top constitutional court on Tuesday, which ruled that aspects of the European Central Bank’s (ECB’s) ongoing stimulus program contravene German law.
The ruling was made in relation to existing complaints from German lawmakers about the ECB’s asset purchase program, which has been running since 2015.
The matter is separate from emergency policy measures adopted by the ECB in response to the coronavirus crisis.
While it said the ECB program hadn’t violated any law, it gave the central bank a three-month ultimatum to demonstrate how the benefits of its effect are proportioned across EU member states.
Following news of the ruling, bond yields rose and EUR/USD came under additional selling pressure. However, it wasn’t enough to send European stocks into the red, as risk appetite improved on the back of additional moves to reopen aspects of the European economy.
EUR/USD needs a catalyst to reverse current downtrend
Currency traders remained cautious in early UK trade on Wednesday, as EUR/USD fluctuated just above the $1.08 level where it’s held since 24 April.
On the day ahead, Eurozone retail sales for April are due out, coming off a 10.3% slump in March when the Covid-19 crisis brought economic activity to a halt.
The eurozone will also get services purchasing managers index (PMI) data for April, while the US session will be highlighted by ADP Payroll data for April. The numbers will be an important indicator ahead of benchmark non-farm payrolls (NFPs) on Friday, which are expected to show the US unemployment rate climbed to more than 15%.
The cautious Wednesday tone extended into stock markets, with the FTSE index opening flat while futures markets are pointing to a 0.5% gain for the S&P500.
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