The euro erased its Asian session advance against other major currencies when trading progressed in early deals on Tuesday as weak European data and caution ahead of this week's ECB rate decision beefed up euro bears.
Eurozone producer prices declined for the second consecutive month in May, largely reflecting weak energy prices, data published by Eurostat revealed today.
Producer prices slipped 0.1 percent on a yearly basis, after falling 0.2 percent in April. This was the second consecutive fall in prices. Economists had forecast prices to remain flat in May.
Month-on-month, producer prices fell 0.3 percent, which was slower than the 0.6 percent decline seen in April. But the rate of decline slightly exceeded the consensus forecast of 0.2 percent.
The ECB is widely expected to keep far-off from the U.S. Federal Reserve's stimulus withdrawal policy, given the currency region's high unemployment rate and low economic growth.
Although the inflation in the zone rose to 1.6 percent in June, reaching closer to the central bank's comfort zone of 2 percent, and the manufacturing sector showed signs of improvement, the jobless rate remains alarmingly high to reach a record of 12.1 percent in May.
There is a distant chance of reducing the rate by 0.25 percent from the current record low of 0.50 percent but an uptick of inflation may coerce policy makers from doing so. Any reduction in the rate will also hurt lending in troubled eurozone nations.
The ECB President Mario Draghi's press briefing after the meeting will be closely watched by investors to get clues on further monetary directions.
Bank of England's monetary policy meeting under the new governor Mark Carney on Thursday and the U.S. non-farm payrolls data on Friday are also the key risk-events in the week, forcing traders to move away from risky bets.
The British economy has made further progress and the recovery is gaining strength, the British Chambers of Commerce, or BCC, said in its latest Quarterly Economic Survey, released Tuesday.
However, it warned that there are still some risks both at home and abroad that could derail the recovery. The second quarter survey showed that most of the key gauges remained stronger than in the first quarter.
Cementing the BCC survey, the construction sector activity in the U.K. expanded for a second consecutive month in June and at the strongest pace in over a year, a survey report from Markit Economics and the Chartered Institute of Purchasing & Supply showed today.
The headline purchasing managers' index rose to 51 in June from 50.8 in May. The June reading was the highest since May 2012. Readings above 50 indicate expansion of the sector. The index has now remained above 50 for a second successive month in June.
Elsewhere, the monetary base in Japan spiked 36.0 percent on year in June, the Bank of Japan said today, standing at 163.537 trillion yen. That follows the 31.6 percent surge in May.
The euro depreciated 0.16 percent against the Swiss franc to reach a low of 1.2341 around 6:00 am ET from Asian session's high of 1.2362. With the RSI staying above 50 and the currency cross being well-above its 21-day EMA there is a probability of a bullish resumption until reaching the near-term resistance of 1.2375.
The common currency retreated from Asian session's fresh monthly high of 0.8592 against the pound to reach as low as 0.8564 around 5:00 am ET and the pair has been holding the momentum since then.
The euro-pound currency cross' failed test of 0.86 resistance could lead it to extend its present bearish wave in a larger consolidation pattern since the beginning of mid-March, with key levels being visible at 0.8550, 0.85, 0.8470, 0.8430 and finally at 0.84.
The single currency also reversed its Asian session advance against the yen, having retreated from a 3-week high of 130.62 to as low as 129.82 around 5:35 am ET. The near-term technical picture is bearish for the euro-yen pair but a rebound is expected after correcting the pair till 129.0 on the downside.
The 17-nation bloc currency also lost momentum against the dollar, retracing back to below the 1.3030 level from a high of 1.3077 hit in the Asian session. The near-term outlook seems the consolidation between the key levels of 1.31 and 1.30 may continue in the near-term, at least until Thursday's ECB action.
