EUR/USD resumes decline as early Mideast ceasefire hopes fade

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The EUR/USD pair is down 0.5% to near 1.1530 in the European session on Thursday, resuming its decline after a two-day recovery move. The major currency pair faces intense selling pressure as the US Dollar (USD) strengthens due to fears that the Middle East war is far from over.

EUR/USD slumps to near 1.1530 as fading Mideast ceasefire hopes revive risk-off mood.
US ADP Employment Change and the ISM Manufacturing PMI data for March outperform estimates.
Higher oil prices have weighed heavily on the Euro.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.5% higher to near 100.00.

Earlier in the day, United States (US) President Donald Trump announced that Washington will intensify military attacks against Iran in the next two to three weeks, and will target every Iranian electric generating plant if the nation doesn’t approve a deal.

US President Trump’s fresh threats have prompted risks that the Middle East war will last long, which has underpinned risk-off impulse again. On Wednesday, market sentiment turned risk-on after both the US and Iran signaled willingness to end the war.

Apart from the risk-off mood, the upbeat US ADP Employment Change and ISM Manufacturing PMI data for March have offered strength to the US Dollar. On Wednesday, the ADP reported that the private sector created 62K fresh jobs, significantly higher than 40K estimates, but slightly lower than 66K. The Manufacturing PMI arrived higher at 52.7 against estimates of 52.5 and the prior release of 52.4.

Meanwhile, the Euro (EUR) has come under pressure due to accelerating oil prices amid renewed fears that the Middle East war will last long. Higher oil prices are unfavorable for the Euro, given that the European Union (EU) relies heavily on oil imports to meet its energy needs.

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.