EUR/USD Daily Trend Analysis

The Euro was unable to make any great headway during European trading on Wednesday and had a generally weaker tone. Risk appetite deteriorated again during the day which undermined demand for the Euro and also triggered fresh defensive support for the US currency while the sharp decline in commodity prices was also important in supporting the US currency

Euro-zone GDP was left unrevised at a decline of 2.5% for the first-quarter final reading while the annual drop was slightly larger than expected, although the impact was limited. The German industrial data was sharply stronger than expected for the second successive day with industrial production rising 3.7% for May following a revised 2.6% decline the previous month.

New US consumer credit declined for the fourth consecutive month according to the latest data, illustrating that consumer spending levels will tend to be subdued and this will maintain a mood of caution over US and global growth prospects.

G8 officials were generally cautious over the economic outlook with comments that there were signs of stabilisation while there were still important risks remaining.

The comments contributed to the generally cautious tone surrounding risk appetite and the Euro weakened further to lows below 1.3850 during US trading before staging a recovery as Wall Street rallied. There were no major comments on the dollar, although markets will inevitably remain on alert for remarks on reserve diversification.

By: Darrell Jobman