Continued pressure on the Euro as the ECB fails to offer sufficient measures to curb the region’s debt crisis

The Euro is still under severe pressure, having suffered a major setback after the European Central Bank (ECB) president Mario Draghi failed to revive bond buying as part of the sustained effort to ease Europe’s fiscal turmoil. Last week, financial markets in the US and Europe rose after Draghi gave a speech in London that many investors interpreted as a signal that ECB action was imminent.

The rise in financial markets was indeed short-lived, following the disappointment at the apparent lack of fulfillment by the ECB. This has led many market players and investors to suggest that the Euro's downtrend is likely to continue. A weaker Euro may in fact deepen Europe's economic crisis however, it is still seen to be providing one silver lining to the Continent's major exporters: a weaker and more competitive Euro.

ECB policymakers are currently expected to work on a detailed plan in coming weeks, including how much money to put into the effort, which would aim to lower interest rates on governments' short-term bonds. The signs of slowing global growth and concern that Europe’s debt crisis is worsening have raised the demand for the safe-haven USD.

Despite the increasingly bleak outlook in Europe, the Bank of England policymakers have made no further announcements to assist the UK economy today. The monetary policy committee has chosen to keep interest rates on hold and to maintain its quantitative easing scheme, despite mounting evidence that the UK economy could be stuck in a rut of economic stagnation.

Meanwhile, figures in the United States show that the initial jobless claims for unemployment assistance rose less than expected to a seasonally adjusted 365,000 during the week ending 28th July. Market traders and analysts are now bracing themselves for the U.S. jobs data which is generally expecting the economy to have created 100,000 jobs in July and the jobless rate to stay at 8.2%.

Today’s Fundamentals

07:53 Germany EUR Markit Services PMI (Jul) - Interviews with German executives regarding the status of sales, employment, and their outlook. Consensus predicts a slight decrease to 49.7 from a previous figure of 49.9, which suggests continued contraction in the German economy.

07:58 European Monetary Union EUR Markit Services PMI (Jul)– This is an indicator of the economic situation in the Eurozone services sector for sales and employment. Consensus forecast an increase to 47.6 from a previous figure of 47.1, which should be bearish for the EUR.

07:58 European Monetary Union EUR Markit PMI Composite (Jul)– This is a report based on surveys conducted with business executives in both private sector manufacturing and services companies. There are no predictions from consensus as the previous figure remains at 46.4, signaling contraction in this sector.

08:28 United Kingdom GBP Markit Services PMI (Jul)–This is an indicator of the economic situation in the UK services sector for sales and employment. Consensus shows an increase to 52.0 from a previous figure of 51.3 which signals expansion and therefore is a positive for the GBP.

To get a live exchange rate login to RationalFX now, or call +44 (0)20 7220 8181