The dollar found some support weaker than 1.2650 against the Euro on Wednesday with two-way market interest above 1.2630 and the Euro drifted slightly weaker… … to 1.2580 in early Europe on Thursday.

The US data was stronger than
expected with an increase in the ISM services-sector index to 63.0 in April from
60.5 the previous month. There were firm readings for the employment, orders and
prices components while factory orders rose 4.2% in March.

The firm data should support
confidence over the Friday payroll report, but dollar sentiment will remain weak
with further concerns over structural weaknesses. Weak confidence will also
ensure dollar selling interest on any significant rallies.

Markets will watch closely the ECB
monthly interest rate decision and press conference on Thursday. The Euro will
spike higher, at least temporarily, if there is an interest rate increase,
although it appears more likely that the bank will lay the foundations for a
June increase. A tough ECB monetary stance will underpin the Euro, but the
currency will be vulnerable if the bank voices concerns over the Euro’s level.
The net risks suggest some Euro retracement is realistic ahead of the Friday
payroll report. The Euro-zone PMI index for the services sector increased
marginally to 58.3 in April from 58.2.

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