It’s been a quiet week in markets on the data front but today we hope to have a little more action. At times is has felt like the heatwave that has been pressing across Europe and likewise in the US, has been keeping a lid on the markets and today we finally have a cool breeze and hopefully that will stir markets awake from their summer lull.
In equity markets, stocks were mixed. European indices traded relatively flat while US markets finished the day marginally higher although nothing to write home about. The USD index traded flat on the day, however we’ve seen some greenback selling this morning but that’s been driven more by antipodean strength rather than USD weakness but that has fed through this morning into outperformance in EURUSD and GBPUSD as well.
The pound has been a notable performer this week, grinding gradually higher as news from Brussels and Brexit talks have a been positive thus far as well as hawkish comments from the BOE’s chief economist overriding Mark Carney’s dovish talk.
The Euro has started the day on the front foot against the USD following better than expected manufacturing PMI data, the concerning thing however is the weaker prints in services and composite reading for the region. EURUSD has traded up from support around 1.1120 and is looking to press towards 1.1200 area where as we discussed yesterday, sellers are lined up as high as 1.1250, progression above there will likely be very difficult.
EURGBP is coming under pressure however. The pound is firmer across the board and EURGBP has broken through the rising trend channel support in place from early May. That would indicate to me there is scope for additional downside and I will be looking for some progression back towards the .8700 to.8680 area.
There is little in the way of UK data today and as such focus remains on the political landscape, both on any news flow from Brexit discussion, or indeed anything relating to domestic UK politics where PM May is still trying to get a coalition to work. That provides plenty of risk across GBP but for now it appears more than content to press higher as long as the news remains positive.
Stateside we finally have some data points to get our teeth into. Home Sales data from May is expected to have picked up as well as services and manufacturing PMI data for June which all have the potential to provide some lift for the dollar and all are expected to have shown some improvements. We also have several Fed speakers across the wires into the afternoon, with Bullard speaking on Monetary policy, while Mester speaks in Cleveland. GBPUSD 1.2760-1.2800 area is a chop zone for GBPUSD so I’d expect to see it get held up there before some clearer direction is found, but in general the trend for GBPUSD remains lower for now and rallies are an opportunity to sell.