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Major Currencies Tread Water as Markets Await BOE, ECB Outcomes

Major Currencies Tread Water as Markets Await BOE, ECB Outcomes

Ilya Spivak, Head Strategist, APAC

Talking Points

  • Eurozone, UK PMIs to Reinforce ECB and BOE Policy Easing Expectations
  • Thin Liquidity May Amplify Volatility, But Conviction Likely to be Lacking

The US Dollar (ticker: USDollar) oscillated in narrow ranges against the major currencies in overnight trade, with markets settling into consolidation mode as liquidity drained ahead of tomorrow’s US market holiday and traders reserved directional conviction before Thursday’s heavy event risk. The European Central Bank and the Bank of England are both due to deliver their monthly policy announcements, with additional easing expected on both fronts.

Final revisions of service-sector and composite Eurozone PMI readings headline the economic calendar. Expectations call for the metric to confirm that cross-sector economic activity in the single currency area shrank for the fifth consecutive month in June. The pace of contraction is expected to match May’s result, amounting to the fastest retrenchment in three years. UK Services PMI is forecast to show the non-manufacturing sector expanded, but at the slowest rate in seven months.

On balance, the slide in third-quarter UK and Eurozone GDP growth expectations (as tracked by a Bloomberg survey of economists) over the past two months suggests traders ought not to be surprised by sluggish performance itself. The focus snow looks to be on what policymakers are prepared to do about the downturn, meaning today’s releases are unlikely to yield much in terms of trend development until the aforementioned rate decisions come across the wires. With that said, thin liquidity conditions can amplify otherwise shallow moves, so it seems wise not to read conviction into any emerging volatility for the time being.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

BRC Shop Price Index (YoY) (JUN)

1.1%

-

1.5%

23:30

AUD

AiG Performance of Service Index (JUN)

48.8

-

43.5

1:30

AUD

Retail Sales s.a. (MoM) (MAY)

0.5%

0.2%

0.1% (R+)

2:30

CNY

HSBC Services PMI (JUN)

52.3

-

54.7

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:45

EUR

Italian PMI Services (JUN)

42.5

42.8

Low

7:50

EUR

French PMI Services (JUN F)

47.3

47.3

Low

7:55

EUR

German PMI Services (JUN F)

50.3

50.3

Medium

8:00

EUR

Euro-Zone PMI Services (JUN F)

46.8

46.8

Medium

8:00

EUR

Euro-Zone PMI Composite (JUN F)

46

46

Medium

8:00

EUR

Italian Deficit to GDP (YTD) (1Q)

-

3.8%

Low

8:30

GBP

PMI Services (JUN)

52.9

53.3

Medium

8:30

GBP

BOE Housing Equity Withdrawal (£) (1Q)

-8.0B

-8.5B

Low

8:30

GBP

Official Reserves (Changes) ($) (JUN)

-

-1308M

Low

9:00

EUR

Euro-Zone Retail Sales (MoM) (MAY)

0.0%

-1.4%

Medium

9:00

EUR

Euro-Zone Retail Sales (YoY) (MAY)

-1.0%

-3.4%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2529

1.2638

GBPUSD

1.5600

1.5716

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

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

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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