The Euro has sold off everyday since last week?s ECB meeting. The weakness has been so severe that the currency is now trading at a fresh 2 month low against the US dollar.
Broad dollar strength was the primary catalyst for today?s move, but we are also seeing holes in European data. In the month of April, industrial production dropped by 0.8 percent with contraction reported by Germany, France and Italy. On top of that, we also saw a slowdown in the growth of wholesale prices, which suggests that inflationary pressures may be abating. Even so, ECB members remain very hawkish and continue to warn of the need for further rate hikes this year. It is this very sentiment that will limit losses in the EUR/USD. The Federal Reserve remains on hold, but the ECB is still looking to raise interest rates. Of course, any further rate hikes are not expected until September at the earliest. In the meantime, there are no major European data due for release tomorrow.