Euro faces renewed selling pressure

The Euro faces continued selling pressure which is keeping the currency below the psychological resistance of 1.1000 as we get ready to enter the European trading session. Investors turn cautious and seem to be waiting for the release of the United States labour market data, which will be published at 12:15 GMT.

Market confidence took a hit yesterday and US equities were under pressure on after credit rating firm FITCH downgraded the United States economy. FITCH downgraded US ratings from ‘AAA’ to ‘AA+’ citing concerns about extended spending in forward years.

The US Dollar Index (DXY) seemingly brushed off the news and has rebounded after a corrective move to near 102.00. The US Dollar Index rebounded on Tuesday despite a decline in US Job Openings and weak Manufacturing PMI data. US JOLTS Job Openings data were released at 9.582M against the prior release of 9.62M.

Meanwhile, US Manufacturing PMI contracted straight for the ninth month, landing at 46.4 below expectations of 46.8. Contrary to that, Factory Orders were recorded at 47.3 and outperformed expectations of 44.0.

On Wednesday, US Employment data will be in focus to be reported by the Automatic Data Processing (ADP) agency. Market consensus is for an increase in private payroll of 188,000; such a reading would be the slowest growth in four months and would follow the surprise of June that showed a super strong increase of 497,000.

On the Eurozone front, inflationary pressures deflated in July by 0.1% but outperformance in the April-June quarter on GDP parameters could force the European Central Bank (ECB) to raise interest rates further. Later this week, investors will keep an eye on Retail Sales data. An impression of solid consumer spending momentum would elevate hawkish ECB bets.

The above economic news will be closely monitored by market participants and some volatility is expected but the real action will begin on Friday with the release of the Non farm payrolls figure from the US which could dictate whether there will be any further rate hikes from the US Federal Reserve.