Euro: Prospect of an ECB Rate Hike Could Limit Losses in the EUR/USD

The Euro tanked today as industrial production failed to live up to the strong factory orders reported yesterday. Annualized growth remained unchanged at 7.7 percent, which compares to the market?s 8.2 percent forecast.

The sell-off in the Euro began as soon as the European market opened, which means that London traders did the bulk of the selling. It is important to realize that the EUR/USD is only a little more than a 100 pips off its high which illustrates the market?s hesitancy to take the Euro much lower before the Federal Reserve and European Central bank meetings. Traders fully expect the ECB President to signal that rates will be increased in June. When he wants to signal a rate hike at the next meeting, he usually reintroduces the word “vigilant” into his vocabulary. With no US data due for release tomorrow besides the FOMC rate decision and the Eurozone calendar only containing German trade data, the EUR/USD could consolidate.