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EUR/USD Struggles to Keep Upward Momentum

May 21, 2015 by Vladimir Vyun

EUR/USD rallied today as the dollar has been weakened by yesterday’s dovish FOMC meeting minutes as well as by today’s economic reports, almost all of which were disappointing. Yet the currency pair has problems with maintaining its upward momentum and is moving down right now.

Initial jobless claims demonstrated an increase from 264k to 274k last week that was a bit higher than 271k predicted by analysts. (Event A on the chart.)

Flash Markit manufacturing PMI fell from 54.1 in April to 53.8 in May, frustrating forecasters who have predicted an increase to 54.6. (Event B on the chart.)

Existing home sales declined to the seasonally adjusted annual rate of 5.04 million in April from the upwardly revised 5.21 million in March. The actual figure was nowhere near the predicted 5.23 million. (Event C on the chart.)

Philadelphia Fed manufacturing index was down from 7.5 to 6.7 in May, meaning that experts who have promised a rise to 8.1 were completely wrong. (Event C on the chart.)

Leading indicators provided the only positive surprise today, rising by 0.7% in April. The growth exceeded the upwardly revised March’s gain by 0.4% and beat the median forecast of 0.3%. (Event C on the chart.)

Yesterday, a report on crude oil inventories was released, showing a drop by 2.7 million barrels last week which exceeded the forecast decrease of 1.3 million and the previous week’s decline of 2.2 million. Total motor gasoline inventories decreased by 2.8 million barrels. (Not shown on the chart.)

Also yesterday, FOMC released minutes of its latest policy meeting. (Not shown on the chart.) The minutes confirmed that chances for a June interest rate hike are fairly low:

A few anticipated that the information that would accrue by the time of the June meeting would likely indicate sufficient improvement in the economic outlook to lead the Committee to judge that its conditions for beginning policy firming had been met. Many participants, however, thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, al-though they generally did not rule out this possibility.

EUR/USD for 2015-05-21

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