Japan's PM victory in snap election underpinning the USD Scarce calendar to kick start the week, focus on Tuesday's PMIs
Spain's political situation weighs on the common currency Dollar broadly weaker on strong Asian data
The EUR/USD pair started the week with a soft tone amid political jitters affecting the common currency. Over the weekend, the German Social Democrat party beat Angela's Merkel ruling one in Lower Saxony, by winning 35% of the vote. Another factor affecting the common currency today is the looming Catalonia's Puigdemont independence decision, as further chafe with Spain PM Rajoy, could harm confidence in the Union.
The EUR/USD pair trades barely changed daily basis around 1.1830, but no doubts the common currency is the weakest currency through the FX board today, as despite greenback's soft tone, the pair is under selling pressure. Undermining the common currency, were headlines indicating that ECB's officials are considering reducing QE to €30billion from current €60 billion per month, starting next January. Also, Estonian ECB's Governing Council member Ardo Hansson, said that monetary policy has to remain accommodative.
The week starts in slow motion, with a holiday in Japan keeping majors within limited ranges, and the EUR/USD pair confined to a tight range around the 1.1730 level. Despite headlines on Friday suggesting a possible missile test from North Korea, no big news came during the weekend. Still risk-averse sentiment dominated the Asian session, with safe-haven gold being the most notorious mover.
The Pound retains the sour tone at the beginning of the week, plunging against the greenback to 1.3300, its lowest since September 14th. UK's Finance minister Hammond was on the wires early London, stating that the sooner the government resolves the Brexit, the sooner the economy would pick up, as uncertainty around the issue today, is weighing on business. The UK's Markit manufacturing PMI for September came in at 55.9 from previous 56.9, indicating anyway that the economy kept expanding at a solid pace at the end of the third quarter.
The EUR/USD pair holds near its daily low of 1.1895, set early Asia, as the pair gapped lower on German's election outcome. Angela Merkel won a fourth term, but her victory was sour, as she now needs to form a coalition government, whilst the far-right got into the Parliament for the first time since WWII, after scoring 12.6% of the votes. Merkel's party got 33% of the vote, down over 8 percentage points from the 2013 election. Adding fuel to the fire, the German IFO survey for September just released came in below market's expectations.
The EUR/USD pair surged to flirt with the 1.2000 level early Europe, as the common currency got a boost from upward surprises coming from the EU preliminary PMIs for September. According to Markit, economic growth regained momentum at the end of the third quarter, as for the whole region, the Composite PMI is up in the month at 56.7 from previous 55.7, the highest since May this year, when the index reached a six-year low. Manufacturing and Services activity, surged to the highest in over 75 months. ECB's President is scheduled to speak in a while, but he will probably avoid talking monetary policy, and if he comments something, will be an attempt to down talk the EUR. Later today, US PMI will grab market's attention.
With no negative headlines during the weekend, Monday started with weakening safe havens, higher equities in Asia and Europe, and the greenback taking some advantage against the EUR and the GBP. Anyway, dollar's advance is barely corrective against the Pound, while the EUR/USD pair is consolidating within Friday's range. The day will be light from the data front, with market's attention centered on Wednesday Fed monetary policy meeting, the event of the week.
Relief was the name of the game at the weekly opening, as North Korean refrained from performing a missile test, while despite the destructive power of Hurricane Irma still desolating Florida, seems the damages won't be as terrible as feared last week. The American dollar gapped higher, particularly against safe haven assets, resulting in the EUR/USD pair also opening lower, and hitting a daily low of 1.1992. An extremely quiet macroeconomic calendar is keeping majors within tight intraday ranges, but the common currency managed to recover the 1.2000 mark and heads into the US session aiming to erase its weekly opening losses.
The EUR/USD pair eased below the 1.1900 level overnight, but didn't go far away with speculative interest cautiously waiting for the US monthly employment report, despite multiple macroeconomic releases ever since the day started. Particularly focused on economic growth, the final August manufacturing PMIs in Asia and Europe came in-line, or above expected, with the exception of German's one, that suffered a minor downward revision to 59.3 from 59.4, still near a six-year high. For the EU, manufacturing growth remains among the strongest since 2011, according to Markit, unrevised at 57.4.
The first batch of UK data is out, and the GBP/USD pair barely reacted to the news, holding around the 1.2975 level and after having fell down to 1.2951 a fresh weekly low. UK's Industrial Production rose by more than expected in June, up by 0.5% MoM and 0.3% YoY, but manufacturing lagged, flat on the month and up by 0.6% when compared to a year earlier, these lasts, matching market's expectations. A separated report showed that the trade deficit widened in June, by £2.0 billion 2017 to £4.6 billion.
The EUR/USD pair eases ahead of the US opening, unable to settle above the 1.1800 level but still up for the day and not far below the key level. Weighing on the common currency were below expected macroeconomic releases, as German industrial production fell by 1.1% in June, against the 0.2% advance expected, whilst the annual figure came in at 2.4%, well below previous 4.8%.
The EUR/USD pair eased at the beginning of the day, as the dollar found modest support on risk sentiment, hurt by North Korea that performed another missile test over the weekend, initially suspected to have hit the Japanese sea. The US responded by flying two supersonic B-1 bombers over the peninsula, and also conducted a missile defense test over the Pacific Ocean. Additionally, Chinese data released overnight was a miss, with the PMI preliminary July manufacturing index down to 51.4 from previous 51.7.
The EUR/USD pair reached 1.1776, an over two-year high during the Asian session, and as a consequence of Fed's monetary policy announcement, which bring no news. The US Federal Reserve failed to clarify when it would start reducing its $4.5B balance sheet, sounding a bit more concerned on softer inflation, triggering a dollar's sell-off. The advance could have lost upward momentum, but the case for a dollar steeper recovery is for now out of the cards. The intraday slide is seen as corrective, moreover as the pair is currently recovering after nearing the 1.1700 figure.
The American dollar retains the soft tone across the board, with the EUR/USD pair inching higher at the beginning of the day, adding a couple of pips to its recent yearly high, now being 1.1683. Nevertheless, there was little follow-through, with majors confined to tight ranges ahead of London's opening. The European session brought the July Markit preliminary services and composite PMIs, which came below expected and previous, sending the pair down to 1.1629. The figures indicate easing growing momentum in the EU for a second consecutive month, but the numbers also indicate that the rate of growth is just slightly below the recent six-year high.
The EUR/USD pair recovered its upward momentum after ECB's latest monetary policy announcement, as the market chose to read the positive headlines and ignore the negative ones. Having traded as low as 1.1479, the pair jumped up to 1.1573, as Draghi promised to discuss changes in guidance in the fall. Policymakers have unanimously decided so, and to keep the ongoing policy unchanged. The press conference started with Draghi saying that recent data confirmed economic strengthening and broad recovery, yet he quickly added that “very substantial accommodation is still needed." He also expressed concerns over inflation being on its way to their target, but not yet there.
The EUR/USD pair eases from its recent highs, but remains within a limited intraday range amid a holiday in Japan and ahead of the release of EU inflation data. The greenback anyway, retains the weak tone after poor inflation and retail sales figures released last Friday cooled down the case for a tighter monetary policy in the US, trading near multi-month lows against most of its major rivals. In June, the EU CPI is expected to have remained flat, while up by 1.3% compared to a year earlier. The macroeconomic calendar has little else to offer today, with market's attention centered on the ECB's monetary policy meeting that will take place next Thursday.
Major pairs trade uneventfully as the week kicks in, with safe-havens' yen and gold weakness outstanding, alongside with stocks positive tone. The EUR/USD pair hovers around 1.1400, following the release of EU data, which included German's May trade balance, and the EU Sentix confidence survey. The first posted a surplus of €20.3B as expected, with exports surging 1.4% and exports up by 1.2%. The Sentix economic index for the euro area has risen for the fifth time in a row to 28.3 points, slightly below the previous and expected 28.4, weighing partially on the common currency. The US macroeconomic calendar will offer some minor reports, including June's labor market conditions index and May's consumer credit change.
The British Pound remains under selling pressure, falling against the greenback down to 1.2862 so far today, its lowest for this July. There are no major news driving the market this Monday, although BOJ's Kuroda reaffirming easing will remain in place until the Central Bank achieves its 2% target has helped the greenback due to the imbalances within both central banks. The GBP came under pressure at the end of last week, as soft growth-linked data cooled down hopes for a rate hike coming from the BOE.
The EUR/USD pair consolidates its Thursday's gains ahead of the release of the US Nonfarm Payroll report, having extended its weekly advance by a few pips, up to 1.1427. The pair retreated modestly after UK disappointing data gave a push up to the greenback, but the overall positive tone persists, as it holds above the 1.1400 level. Minor data released at the beginning of the day was encouraging, with German Industrial Production up in May by 1.2% from the previous month and by 5.0% when compared to May 2016. The monthly core reading, excluding energy and construction was up by 1.3%.