The USD and the EUR in Focus, with Private Sector PMIs in the Spotlight

The Dollar managed to stabilize through the Asian session this morning, spending the early part of the day relatively range bound following last week’s declines, with a bounce going into the European open, ahead of plenty of stats due out through the week, not to mention the FOMC interest rate decision and accompanying rate statement on Wednesday.

FOMC doves and the FED Chair have been particularly vocal over softer inflation, which certainly suggests that Wednesday’s rate statement will be on the more dovish side, the only real issue being whether there is any negative sentiment towards the U.S economy, the statement coming out ahead of 1^st estimate, 2^nd quarter GDP numbers on Friday.

Macroeconomic data out of the U.S has been mixed through the 2^nd quarter, which has left the markets with mixed feelings over the U.S economy, supporting the EUR’s move to $1.16 levels, with Trump’s assistance of course, with the Eurozone economy having shown signs of a possible pickup in momentum going into the 3^rd quarter, following what is expected to be a solid 2^nd.

Prelim June private sector PMI figures out of the Eurozone this morning will provide some guidance on what to expect in the 3^rd quarter, with forecasts pointing to a slight softening in German manufacturing in the month, though for the EUR to see a sell-off, the numbers are going to need to be below forecasts when considering the fact that June PMIs were at around 6-year highs.

With no material stats out of the UK today, the markets looking ahead to the 1^st estimate GDP numbers due out on Wednesday. There are certainly plenty of unknowns over the BoE’s position on monetary policy ahead of the August MPC meeting in less than 2-weeks, with the last round of speeches continuing to resonate, despite weak macroeconomic data out of the UK, supporting the pound’s recovery, with cable just managing to hold on to $1.30 levels at the time of the report, though how the pound ends against the Dollar by the close will ultimately depend upon July’s private sector PMI numbers out of the U.S this afternoon and of course the usual partial recovery following the Dollar dumping exercise that was likely an oversell.

PMI Manufacturing numbers out of NY State and Philly were both softer for July, according to numbers released last week, suggesting that there is likely to be a larger than forecasted easing in sector productivity in July, which will be a negative for the Dollar, though how the service sector performed will be of more significance, the market likely to be able to swallow weaker manufacturing sectors numbers. Thrown into the mix are the June existing home sales figures, which are also forecasted to fall. So, based on the forecasts, it’s going to be a big ask for the Dollar bulls to come out of hiding and provide some much needed support.

At the time of the report, the Dollar Spot Index was up 0.14% at 93.985, with the EUR down 0.06% at $1.1656, $1.17 levels certainly in sight, which will make it interesting from an ECB monetary policy perspective, Draghi’s desire and continued success at pegging back the EUR now seeming to be lost thanks to Trumps.