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  • richard evans

Weak UK/EU PMIs and stronger US PMIs send GBPUSD and EURUSD lower

Good morning

Some weaker than expected PMIs from EU and UK dragged GBPUSD and EURUSD off their highs yesterday and then by contrast some stronger than expected US PMIs helped that move continue so by the close GBPUSD had moved from a high of around 1.2285 to 1.2155 and EURUSD from 1.0680 to 1.0585. Both are only a few points away from those lows as I type despite a brief attempt early this morning to push a bit higher.

Overnight the price action was in AUD, where the Aussie CPI data came in stronger than expected and also stronger that RBAs own forecasts. This has led analysts to look for an RBA rate rise next month. AUD had a push higher on the release, GBPAUD traded from 1.9130 to 1.9020 in a straight line although it has since worked its way back up to 1.9100. GBPUIAD was actually up above 1.9300 yesterday morning, making the move overnight more significant. AUD pushed up against USD from 0.6360 to 0.6400 although it is now back almost at pre-release levels. AUDNZD up at 1.0900 pretty much matching the June, July and Sept highs.

In the Middle East, the situation remains tense. US has said it does not want war with Iran but will act if Iran, or Iranian backed forces, attack Americans. Meanwhile both US and Russia have said they’d like to see a pause in violence to allow aid to reach Gaza. Israel are reluctant to allow aid in as they believe it will be taken by Hamas rather than reaching citizens of Palestine.

While we know economic data such as we say with the PMIs yesterday, can move markets, I still see the Middle East situation as being responsible for the more significant moves. If we were to see a glimmer of hope for peace then perhaps USD will move off its current highs. Any escalation though is likely to see further USD upside.

Bank of Canada will announce their latest rate decision this afternoon. Widely expected to keep rates unchanged as they did last time around, USDCAD is currently 1.3760, within reach of the early October highs around 1.3780. Fate of CAD is really in the hands of the statement which follows later in the day, tempting to look at the downside either through cheap options of spot with a tight stop. An overnight 1.3800 USDCAD call costs just 15 CAD pips.

Otherwise the calendar is full of central bank speakers including Powell later, although I had thought he was bound by the Feds own blackout period. Not sure if my calendar is wrong.

Finally, we know we’ve seen some dismal weather recently, I had thought it had passed but I see Mark’s home, the Isle of Wight has been hit by some pretty horrendous rain. I don’t remember seeing any warnings of that, maybe there was I didn’t notice, an amber warning for more rain and flood warnings are now in place. The pictures I have seen of Ryde station and surrounding rounds suggest the warnings may have come a bit late. Hope everyone is dry there.

- 09.00 German IFO

- 15.00 US new home sales

- 15.00 BoC rate announcement

- 16.00 BoC press conference

- 18.00 ECBs Lagarde speaks

- 21.35 Feds Powell speaks

- 23.00 RBAs Bullock speaks

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