It was President’s day in the US yesterday and flows were lower than usual with the US on holidays and little in terms of headline attention from the Eurogroup meeting in Brussels to attract attention. Markets preferring to wait for the river of data from Europe today; PMI’s from the Eurozone and public finances from the UK as well as comments from Mark Carney also due before the US come to market this afternoon so we should have an interesting morning. In Europe yesterday there were moderate gains seen in major equity indices. Frances CAC, the only bourse in negative territory as election concerns continue to weigh on sentiment there as Marine Le Pen continues to show gains for the right. Overnight sentiment remained well supported as hopes US trade with Asia would continue which spurred on Japanese stocks with the Nikkei up .5% and Topix up .4%, the JPY traded lower on the improved sentiment.
The Euro has dropped lower this morning despite some better than expected data points released. French manufacturing PMI’s were weaker than expected but the services and composite figures more than made up for that, while German and Eurozone figures were also a lot firmer than expected. The Euro however has plummeted, and its primary driver this morning appears to be coming from sentiment and interest rates as Greek debt woes cause huge concern once more. EURUSD is now testing lower and back into that 1.0525/50 support area, a break below there opens up potential back to the lows around 1.0340. EURUSD is back below .8500 and .8472 area should provide support with Feb lows just below .8460 next in line to offer support, .8300 area beckons below that and a break below that level could really start a larger slide in EURGBP.
It’s a busy day for GBP as well, public finances and public sector borrowing headline the morning data but focus will be on Carney and co who are due before the treasury select committee, with an annual report from the BOE’s chief economist Andy Haldane due for release at 10.00am. This is the first major outing for the BOE since the inflation report and given last week’s weaker than expected PMI, there comments could well be interesting. Any indication of a desire to raise rates will no doubt find GBP under some support, but a willingness to absorb above average inflation could place downside on sterling pairs. We are seeing a mixed bag from GBP this morning, EURGBP is dropping on a weak Euro, while GBPUSD is lower on a stronger USD. 1.2400 area should provide some support for GBPUSD, a break however could favour a move back towards the lows. That being said this area has held firm for several attempts lower, and the resulting bounces have brought GBPUSD back towards 1.2500/1.2550.