Euro trading quietly around 1.09, FOMC minutes next

• Eurozone and German Services PMIs weaken in June
• Markets looking for clues as Fed releases minutes on Wednesday

EUR/USD is showing limited movement on Wednesday. In the European session, the euro is almost unchanged at 1.0882.

German and eurozone Services PMIs ease

The eurozone services sector continues to show growth, but the June numbers showed a deceleration. Eurozone PMI slowed to 52.0, shy of the consensus of 52.4 and down from 55.1 in May. This marked a five-month low. Germany’s services sector stalled, dropping from 53.9 to 50.6 and missing the consensus of 50.8 points. The 50.0 level separates contraction from expansion.

The eurozone economy has been recovering slowly, with services driving economic activity as manufacturing continues to decline. The ECB, which showed up late to the rate-hiking party but has been quite hawkish, will need to tread carefully in order to guide the economy to a soft landing. The central bank meets next on July 27^th and is expected to raise rates. Inflation has been falling but core CPI remains persistently high.

The ECB has signalled more rate hikes are coming and Joachim Nagel, head of the German central bank, reiterated the ECB’s stance, saying this week that inflation risks are tilted to the upside and the ECB’s rate-hike cycle has “some way to go”.

Wednesday’s highlight is the FOMC minutes of the June meeting, when the Fed paused rates after 10 straight hikes, leaving the benchmark cash rate to a range of 5.00%-5.25%. The markets are widely expecting the Fed to hike at the July meeting but aren’t sure about another rate hike this year. Fed Chair Powell has signalled that the Fed plans two hikes in the second half of the year and the minutes could change the market’s tune if the Fed’s tone is hawkish.

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EUR/USD Technical

• EUR/USD is testing resistance at 1.0908. The next resistance line is 110.50
• 1.0838 and 1.0766 are providing support

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