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EUR/USD remains under selling pressure around 1.0732 during early Asian trading on Wednesday. The euro weakened against the dollar amid fears of a recession in the euro zone amid weak economic data in the euro zone.
Producer prices in the euro zone fell for the seventh straight month in July, data from Eurostat showed on Tuesday. The producer price index (PPI) in the euro zone fell to -0.5% on month from -0.4% in the previous month, and -7.6% on the year from -3.4% in the previous month. Also, the HCOB Composite PMI fell to 46.7 in August from 47.0 in July. Finally, the HCOB services PMI fell to 47.9 in the same period from 48.3 in July. The euro extended losses as investors worried about a potential recession amid dismal data. Dismal data could convince the European Central Bank (ECB) to drop its hawkish stance at its upcoming meeting.
Earlier this week, ECB President Christine Lagarde emphasized the importance of the central bank firmly anchoring inflation expectations. ECB Governing Council member Joachim Nagel advocated stabilizing prices without providing more details, while his colleague Pierre Wunsch said the central bank could do more. Some more, it’s too early to talk about stopping rate hikes altogether.
Across the ocean, U.S. factory orders fell to the lowest since mid-2020 in July. The month-on-month data was -2.1%, an increase of 2.3% in the previous month, which was lower than market expectations of 0.1%. Regarding last week’s data, the U.S. non-farm payrolls (NFP) in August was 187,000, higher than the previous value of 157,000, and also higher than the market consensus of 170,000.
According to the World Interest Rate Probability (WIRP) tool, market participants expect a rate hike of 25 basis points for the year, bringing the rate to 5.75%. In addition, Federal Reserve (Fed) Governor Christopher Waller (Christopher Waller) said that the Fed still has more room to raise interest rates. He added that the data will determine whether the Fed needs to raise rates again, and whether the Fed has finished raising rates. The hawkish comments boosted the greenback against the euro and were bearish for the euro/dollar pair.
Market participants will be watching German July factory orders and euro zone July retail sales for fresh impetus. In the US, the US ISM Services Purchasing Managers Index for August will be released on Wednesday. Traders will take cues from the statement and look for trading opportunities around the EUR/USD pair.
