It was a mixed day all round yesterday. In Europe, stocks were little changed on balance and closed off the month of May in the green, albeit only slightly. The STOXX 600 was up .9% on the month, selling since last week closing off the month’s gains. In the UK the FTSE rallied to fresh all-time highs before selling back lower and eventually closing the day more or less flat. In the US it was a similarly mixed day, after the opening bell there was some heavy selling which drove indices lower but they managed to claw back those losses, however they still traded lower on the day.
It was a full circle day for the GBP. It faced selling early doors as the fallout from polls suggested May and Co would not get a majority then reversed as further reports suggested this was not the case, trading back above 1.2900. We can expect this back and forward over poll results for the next couple of weeks. The USD was broadly sold off throughout the day, weaker PMI data and some Fed speakers who, perhaps were not all out hawkish saw the USD index drop some .5%, while the Euro was firmer on the day despite some weaker than expected CPI readings.
Euro has faced some selling this morning following a weaker run of data with weaker manufacturing from both Italy and France. The Eurozone composite figure was as expected however and euro direction will likely still be dictated by broader expectations on ECB policy and their potential taper. It’s worth noting however that in recent week’s data has been somewhat less consistent than most of 2017 and with political concerns in Italy and Greek debt talks ongoing, the region still has some downside risks.
EURUSD rallies above 1.1250 continue to find sellers, while downside towards 1.10785/1.1120 has seen some buyers. EURGBP holds below .8736 and any rally above has been sold. This area marks the technical retracement of the post Brexit rally from .7630 to .9436. We have seen it act as resistance on a number of occasions over the last 11 months so the area is key. A break above here and .8800 attracts very quickly while .8655 and .8606 offer support for any moves lower.
The USD still hovers around 8 month lows as markets await this month’s FOMC meeting. There is plenty of heavy weighted data on tap from the US today so the USD may get some reprieve and it has already started the day slightly firmer. The ADP employment report is expected to set the tone for tomorrows NFP figures, the ADP is expected to show 180k jobs added to the economy (same as the NFP expectant figure). The ISM manufacturing figures are also due across the wires. The big event however, may well come from when the Feds Powell speaks on the normalisation of Monetary policy, so any indications of 2 or more hikes this year should provide the USD some boost.