The euro trades little changed on Wednesday as markets remain unbiased ahead of key macroeconomic events this week and rumors and denials of Spain accepting a bailout. On Thursday, the ECB and the BoE will decide on monetary policy while the U.S. employment report will be released on Friday.
Meanwhile, focus remains on the timing of the long anticipated Spanish sovereign bailout request. Despite the fact that Spanish PM Rajoy said yesterday that a bailout is not imminent, bond yields and the euro have not been particularly perturbed by the comments.
In the U.S., the ADP employment report showed private sector created 162,000 jobs in September, more than expected, although estimated gains in previous months were revised lower. The ADP report historically is one of the best indicators of the nonfarm payrolls, however it could be a wide month-to-month discrepancy between the government and ADP data. The other employment indicator set for release is the employment component of the non-manufacturing ISM at 14:00GMT.
Euro range trade likely to persist ahead of ECB and NFP
The EUR/USD continues to consolidate in a familiar range around 1.2900/50 after staging a recovery from a 3-week low of about 1.2800 scored on Monday. It was last down 0.1% at 1.2903.
While this sideways pattern is likely to persist ahead of the European Central Bank decision and theU.S. employment report on Friday, the longer-term outlook for EUR/USD remains uncertain. Despite the risk of more bad news from the eurozone, the outlook for EUR/USD has to be set against a weak set of dollar fundamentals.
"Now that the Fed has made it clear that it is focusing policy on employment, this week's ADP and payrolls data will be even more keenly watched than usual. If Friday's employment data comes in anywhere close to market forecasts it will be reasonable to assume that the Fed will continue to plough ahead with its open ended QE", explains the Rabobank analyst team.
"While Bernanke argued this week that his policy will eventually be positive for the USD he is assuming that growth levels will return to normal. For now the threat of more supply of USD will keep the greenback on the back foot. As a consequence we see any pullback in EUR/USD in the next few weeks as likely to be short lived", Rabobank team concludes.
Meanwhile, UBS analysts also maintain the bullish stance on the single currency, suggesting "Initial resistance is at 1.2988, a break above would signal fresh extension of gains to 1.3031 and then 1.3085. Support lies at 1.2804 ahead of 1.2758."