The long bank holiday weekend left markets with plenty of news to digest and with the US returning to markets as usual yesterday, the rest of us are playing catchup today. Sadly, we’re catching up to a broad bout of risk-off as trade war tensions escalated over the weekend with China adding another $3bln in tariffs to US imports. It would seem that China are taking their time with this process and they have plenty left in the arsenal so it’s unlikely we’ve heard the end of this matter. So despite signs of some progress being made in talks early last week, China are still happy to continue with additional tariffs, perhaps until some agreement is made?
US stocks opened the week facing heavy selling and that continues through into this morning’s trade with major European bourses all opening lower, while only the Hang Seng traded higher in Asian trade overnight. Despite all this, currency markets would appear to have been enjoying the longer weekend, the only notable selling came in some euro pairs as EURUSD, EURGBP, EURJPY and EURCHF all traded lower. Needless to say the risk aversion favorite JPY found itself in plenty of demand to welcome in the week, although interestingly overnight AUD and NZD, both risk related currencies, traded higher.
Given it’s the first week of the month and of course a new quarter, we can expect the usual run of PMI data from across the world to help us assess the trajectory of relevant economies. First up today will be manufacturing data, which we’ll receive from the Eurozone and the UK, the services and composite figures for those regions are due for release and are likely to carry a little more weight given the fuller picture they’ll paint. CPI data for the Eurozone will be a focal point in tomorrow’s morning session, while tomorrow afternoon sessions will offer up some harder hitting figures from the US in the form of ADP employment data, Non-Manufacturing ISM, Factory orders and durable goods figures, amongst others. We’ll also have several Fed speakers throughout the week and of course the all-important NFP employment release due on Friday.
EURUSD still sitting towards the lower end of its range, 1.2240/50 still looking like a support zone and now in line with the 100 day moving average (EMA) so a break below that could well mark the start of a larger move lower. We’d need to see a break sub 1.2155 if this was to really accelerate but that marks the low side for now. 1.2344 offering light resistance to moves higher, although the real challenge is holding above 1.2400.
EURGBP maintaining its lower range position, we’ve had a couple of attempts to break and hold back above .8780/90 area and the failures here suggest we may go back to pressure the lows. UK data will be important this week, markets looking for a BOE rate hike in the coming months and if data is anyway weak, this will gradually be priced out of sterling levels. .8730 is the bull/bear line this week, a close below that level should see the pair look to test back to lows.
1.4010 holing GBPUSD higher for now, the 100 day moving average (EMA) should catch any drops below there in the shorter term. Any rally above 1.4200 thus far has failed to hold bids so I’d expected there to be sellers waiting around those levels to drive the price back lower once again.