On a morning like this, it’s very hard to focus on what almost seems irrelevant FX market news. All our thoughts are with those caught up in last night’s horrendous attack in Manchester.
In trying to normalise and look at markets, we have very little new market news to report on since yesterday. Overall the main takeaway from yesterday was another session of dollar weakness. Further dollar lows were seen with the benchmark rates such as EURUSD and GBPUSD hitting highs yesterday and in overnight trading.
Our short term outlook for the US Dollar is unchanged from yesterday with the potential for a reprieve dependent on various Fed speakers out later today/tomorrow followed by the minutes from the last FOMC meeting out on Wednesday evening. If all are singing off the hymn sheet in terms of flagging an imminent rate hike next month, then we could see some USD buying.
As we also flagged yesterday, Tuesday was going to be an active day in terms of European data releases. Already this morning we have seen the latest reading of Q1 German GDP which came in as expected at 2.9% year on year. Just out too has been a series of the latest PMI readings across the Eurozone. Interestingly the Services and Manufacturing readings in the two major economies of France and Germany are showing contrasting divergences, but when one looks at the overall composite figures for the economic region as a whole, Services PMI missed expectations whereas Manufacturing PMI beat consensus however, both are still showing strong above trend growth levels.
In further positive Eurozone data, the busy morning has also seen the latest German IFO survey results again showing a positive current sentiment and a more positive outlook. From a FX market reaction, there euro is mildly higher and in particular EURGBP is trading higher than most pairs. As we’ve seen a break of the .8625 level last night (GBPEUR 1.1594), the next area of real resistance of .8735 is firmly in play now.