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EUR/USD Drops After German Court’s Ruling on ECB Bond Buying

May 5, 2020 by

EUR/USD was weak today after the German court ruled that the mass bond-buying by the European Central Bank is against the European Union Treaty. While the court did not consider the program to be entirely illegal, it gave the ECB three months to prove that the program is not used to pump funds into the most-indebted countries, otherwise, the Bundesbank will have to pull out from the program. As for today’s economic reports in the United States, they were not good, not surprising in the midst of a pandemic. But some of them managed to beat expectations.

US trade balance deficit widened to $44.4 billion in March from $39.8 billion in February, exceeding the average forecast of $41.0 billion. (Event A on the chart.)

Markit services PMI sank from 39.8 in April to 26.7 in March according to the final estimate. Market participants were expecting that it would remain unchanged from the preliminary estimate of 27.0. (Event B on the chart.)

ISM services PMI tumbled to 41.8% in April from 52.5% in March. Despite the big drop, the actual value turned out to be better than the market expectations of 37.5%. (Event C on the chart.)

Yesterday, a report on factory orders was released, showing a big drop of 10.3% in March, exceeding even the pessimistic expectations of a 9.2% slump. The indicator was down just marginally by 0.1% in February. (Not shown on the chart.)

If you have any comments on the recent EUR/USD action, please reply using the form below.

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