EUR/USD, GBP/USD, DXY Price Forecast: Dollar Index Approaches $103, What’s Next?

Recent economic data from Europe indicates a mixed performance in the services sector, impacting the EUR/USD. Spain’s Services PMI dropped to 53.9 from 56.8, and Italy’s fell to 51.7 from 53.7, signalling slower growth. Conversely, Germany’s Services PMI slightly improved to 52.5, and France’s remained stable at 50.7.

Overall, the Eurozone’s Services PMI held steady at 51.9. However, investor confidence in the Eurozone has weakened, with Sentix Investor Confidence plummeting to -13.9 from a forecast of -5.5, reflecting growing economic concerns.

In the UK, the GBP/USD has shown resilience as the Services PMI was revised to 52.5, exceeding the forecast of 52.4. The BRC Retail Sales Monitor also showed stability at 0.3% year-over-year.

Meanwhile, the Dollar Index (DXY) rose 0.16% to 102.911, supported by better-than-expected ISM Services PMI data at 51.4, surpassing the 51.1 forecast. Rising US Treasury yields further bolster the dollar, despite mixed economic signals.

Events Ahead

Looking forward, the EUR/USD may face pressure as the Eurozone prepares to release retail sales data. The forecast is a modest 0.1% increase, a potential indicator of stagnant consumer demand. In Germany, factory orders showed a surprising gain of 3.9%, exceeding expectations and providing some optimism for the Euro. However, concerns persist over the Eurozone’s broader economic health, influenced by falling investor confidence and stagnant payroll growth in France.

The GBP/USD will be influenced by the upcoming Construction PMI, forecasted at 52.5, and positive results could strengthen the pound. Meanwhile, the Dollar Index could see movement with the release of the US trade balance, expected to show a deficit of $72.5 billion.

Additionally, the RCM/TIPP Economic Optimism index, forecasted at 45.0, will offer insights into US economic sentiment. With the Federal Reserve’s interest rate strategy in focus, any positive US economic data could further bolster the dollar, adding pressure to both the euro and the pound.