In another positive sign for the Eurozone economy the latest raft of retail PMIs all showed an improvement on the month, although this failed to keep the Euro on an uptrend.
Comments from European Central Bank (ECB) Chief Economist Peter Praet knocked back the single currency, putting an end to its earlier bullish run.
Taking a somewhat dovish tone, Praet emphasised the importance of stronger wage growth to creating stronger underlying inflationary pressure.
This suggested that the central bank could leave monetary policy on hold for some time to come, as the policymaker noted that sufficient wage growth may not emerge until ‘a relatively late stage in the economic expansion’.
EUR exchange rates softened in response, with interest rates looking likely to remain at their current lows for some time to come in spite of the strength of recent economic data.
As analysts at ING noted:
‘While FX markets seem not to care at this stage and hawkish expectations continue to prevail, one needs to be wary of the consequences of markets falsely front-running ECB policy: any EUR rally is one dovish signal away from being swiftly reversed.’
The Euro could come under further downside pressure as the final results of the French presidential election near, although the odds still favour a comfortable victory for centrist Emmanuel Macron.
While opinion polls continue to point towards a Macron win the possibility of a fresh political upset nevertheless remains.
If far-right candidate Marine Le Pen pulls off a surprise victory then the Euro US Dollar exchange rate could slump sharply on Monday.
The appeal of the US Dollar strengthened in the wake of the Federal Reserve’s latest policy meeting, meanwhile, as the odds of a June interest rate hike rose.
Although some recent US data proved soft better-than-expected ADP employment change and jobless claims figures pointed towards continued strength within the labour market.
A strong showing from this afternoon’s non-farm payrolls report could extend the EUR USD exchange rate’s slump, particularly if the headline figure shows a strong rebound from March’s disappointment.
Any softness in wage growth could limit the bullishness of the ‘Greenback’, though.
Speeches from a number of key Fed policymakers will also be in focus, with any hawkish commentary likely to boost the US Dollar across the board.
Should policymakers show any signs of reluctance, however, the EUR USD exchange rate could find some measure of support.
Current EUR USD Interbank Exchange Rates
At the time of writing, the Euro US Dollar exchange rate was trending lower around 1.09. Meanwhile, the US Dollar Euro exchange rate was making gains in the region of 0.91.