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Euro at Risk as PMIs Set Stage for ECB, Dollar Gains on Haven Flows

By , Currency Strategist
03 October 2012 07:05 GMT

The Euro looks vulnerable as PMI data highlights deepening recession in the Eurozone and fuels speculation about ECB stimulus ahead of this week’s policy meeting.

Talking Points

  • Euro May Face Selling Pressure as PMIs Highlight Urgency of ECB Stimulus
  • US Dollar Higher as Chinese, Australian Economic Data Disappoints Overnight

The revised set of September’s Eurozone PMI figures is in focus in European hours. Expectations call for confirmation of initial estimates showing manufacturing- and service-sector activity shrank at the fastest pace since June 2009. As we discussed in our weekly Euro forecast, signs of deepening recession against a backdrop of aggressive fiscal consolidation in Spain and France unveiled last week may amplify hopes for ECB easing, weighing on the single currency. While priced-in expectations suggest Mario Draghi and company will remain on hold this week – an outcome made all the more likely by the run-up in the latest set of inflation readings – traders will be keeping a close eye on any guidance about forthcoming efforts to bolster growth in the region.

The US Dollar advanced against its top counterparts overnight as Asian stocks declined, driving demand for the go-to haven currency. The MSCI Asia Pacific regional benchmark stock index fell 0.4 percent on the back of a disappointing data set. China’s Non-manufacturing PMI print showed service-sector activity grew at the slowest pace in at least 19 months. Meanwhile, Australia’s Trade Balance report revealed the largest deficit since March 2008 as exports tumbled 12.3 percent from a year before. That marks the largest slump in overseas sales since March 2010. The New Zealand Dollar bore the brunt of the selloff, down 0.6 percent against the majors.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

BRC Shop Price Index (YoY) (SEP)

1.0%

-

1.1%

23:30

AUD

AiG Performance of Service Index (SEP)

41.9

-

42.4

1:00

CNY

Non-manufacturing PMI (SEP)

53.7

-

56.3

1:00

AUD

HIA New Home Sales (MoM) (AUG)

-5.3%

-

-5.6%

1:30

AUD

Trade Balance (A$) (AUG)

-2027M

-685M

-1530M (R-)

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:45

EUR

Italian PMI Services (SEP)

44

44

Low

7:50

EUR

French PMI Services (SEP F)

46.1

46.1

Low

7:55

EUR

German PMI Services (SEP F)

50.6

50.6

Medium

8:00

EUR

Euro-Zone PMI Composite (SEP F)

45.9

45.9

Medium

8:00

EUR

Euro-Zone PMI Services (SEP F)

46

46

Medium

8:30

GBP

PMI Services (SEP)

53

53.7

Medium

8:30

GBP

Official Reserves (Changes) (SEP)

-

$732M

Low

9:00

EUR

Euro-Zone Retail Sales (MoM) (AUG)

-0.1%

-0.2%

Low

9:00

EUR

Euro-Zone Retail Sales (YoY) (AUG)

-1.9%

-1.8%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2877

1.2965

GBPUSD

1.6025

1.6172

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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03 October 2012 07:05 GMT