Euro remains flat above 1.1600 after softer-than-expected Eurozone services activity

• EUR/USD is struggling to find acceptance above 1.1600 after bouncing from two-week lows at 1.1565.
• The downward revision of the Eurozone's Services PMI has failed to provide support to the common currency.
• ING sees the Euro depreciating further as the market overestimates ECB hawkishness.

The Euro (EUR) picks up against a somewhat softer US Dollar (USD) on Wednesday, but upside attempts are frail, after last week's 0.8% decline and Eurozone PMI data have failed to boost confidence in the Eurozone's economic outlook. The EUR/US is struggling to find acceptance above the 1.1600 area, after bouncing from two-week lows at 1.1565 on Wednesday

Eurozone final HCOB Purchasing Managers Index (PMI) figures have been revised down to a 51.7 reading from the 51.8 previously estimated, which showed a steady expansion level from July. Likewise, the Composite PMI has been revised down to 52.0 from preliminary estimations of 52.1.

Regarding Eurozone countries, German Services PMI has been revised up to 49.7 in August from previous estimations of 48.5, but still at contraction levels, below the 50 mark. In the rest of the Eurozone, France's services PMI has shown the weakest performance, downwardly revised to 48, from previous estimations of 48.4, while Italy and Spain's Services PMIs showed stronger figures with 55.2 and 57.8 respectively.

Later on the day, Eurozone’s Producer Price Index data is expected to show that factory inflation bounced up to a 1.2% growth in July, following a 0.3% contraction in June. These figures would suggest that price pressures remain high, and add pressure on the European Central Bank to hike interest rates later this month.

ING sees the Euro poised for further decline

Analysts at ING, however, warn that ECB policymakers “may be more concerned about widening European bond spreads than second-round inflation risk at this point,” which in their view “argues for a less hawkish message than what markets may be expecting.”

Against that backdrop, ING adds that it “still feels risks are condensed to the downside in EUR/USD and expects a return to the 1.150-1.155 range in the near term.”

In the US, on Wednesday the ADP Employment Change report showed a 38K increase in private jobs in July, below the 47K expected and the lowest level since January.

Beyond that, New York Federal Reserve (Fed) President John Williams affirmed that the bond yields rally is due to the solid economy, rather than to inflation fears, and suggested that he will take a "wait and see" stance at the next Fed meeting, tempering expectations of an interest rate hike.