The rebound in the US dollar has led to a retracement in the Euro but this does not mean that the EUR/USD?s shot at a new record high is over. US traders will be missing out on two key economic releases due out from the Eurozone tomorrow morning. We are expecting service sector PMI and retail sales.
[B]Given the surprise improvement in the manufacturing PMI report, the market is forecasting similar strength in the service sector. Whether or not this will help the Euro rebound will be dependent upon how bad Eurozone retail sales was in the month of May. The sharp drop in sales in Germany that month has pushed expectations down to -0.5 percent. The marquee event this week is of course the ECB interest rate decision on Thursday. The recent rise in the Euro could reduce the central bank?s urgency to raise rates since a stronger currency automatically reduces inflationary pressures. Meanwhile the Swiss franc gave back nearly all of its gains after consumer prices fell short of expectations in the month of June. The annualized pace of growth increased from 0.5 percent to 0.6 percent instead of the market?s 0.7 percent forecast. This should be a just a bump in the road however since the Swiss National Bank is still expected to lift interest rates next quarter. [/B]