The EUR/USD pair holds below the 1.0600 mark after retracing from near 1.0700 during the early Asian session on Wednesday. The sell-off of the major pair is supported by the rebound of the US dollar (USD) broadly and the optimistic US data. EUR/USD currently trades near 1.0593, gaining 0.03% on the day.
The US PMI data on Tuesday came in better than expected and boosted the Greenback, according to the latest Purchasing Management Index (PMI) reports. The October flash Composite PMI climbed to 51.0 from 50.2. The Services PMI rose to 50.9, while Manufacturing PMI grew to 50.0. This is the first time in six months that manufacturing has not fallen below 50. Additionally, the Richmond Manufacturing Index for October fell to 3 from 5 in the previous reading, below the market expectation.
That being said, the robust US economic figures alleviated fears that tighter monetary policy and higher borrowing rates would dampen investment and industrial activity. However, traders will take more cues from the release of US growth numbers on Thursday. If the report shows weaker-than-expected data, it could drag the USD lower and cap the downside of the EUR/USD pair.
On the Euro docket, Eurozone economic data on Tuesday revealed a contraction in PMI and lower inflation in October. These reports support the anticipation that the European Central Bank (ECB) will maintain interest rates unchanged on Thursday.
The flash Composite PMI for the eurozone dropped to 46.5 in October from 47.2 in September. It was the sixth straight reading below 50, showing that the slowdown is ongoing. Meanwhile, the Manufacturing PMI decreased to 43.0 versus 43.4 prior, worse than expected of 43.7. The Services PMI fell to 47.8 versus 48.7 prior. The downbeat Eurozone data exerts some selling pressure on the Euro and acts as a headwind for the pair.
Market participants will monitor the German IFO data and ECB’s President Lagarde's speech on Wednesday. On Thursday, the attention will shift to the preliminary estimate of the US Q3 Gross Domestic Product (GDP) and ECB rate decision. The US Core Personal Consumption Expenditure Index (PCE) will be due on Friday. These events could give a clear direction to the EUR/USD pair.