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Euro to Look Past PMI Data with "Brexit" Worries at the Forefront

Euro to Look Past PMI Data with "Brexit" Worries at the Forefront

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • British Pound gains as polls suggest support for “Brexit” ebbing
  • Follow-through far from assured as markets’ risk appetite firms
  • Eurozone PMI data likely to likely to pass unnoticed by investors

The British Pound outperformed in overnight trade, rising against all of its major counterparts after a series of opinion polls showed respondents were leaning against so-called “Brexit” in the looming UK EU membership referendum. The anti-risk Japanese Yen slumped while the sentient-linked Australian, Canadian and New Zealand Dollars traded higher as the prospect of maintaining the status quo after the momentous vote lifted investors’ spirits.

S&P 500 futures are pointing firmly higher, hinting the risk-on mood may carry forward. Assuming as much seems dangerous however. Sentiment has been fickle in the run-up referendum and may swiftly change direction as voting begins and early indications begin to cross the wires. Even a seemingly trivial headline that hints the Leave campaign may be pulling ahead could swiftly sour the markets’ mood.

The preliminary set of June’s Eurozone PMI figures headlines the economic calendar in European hours. The region-wide composite measure is expected to show the pace of manufacturing- and service-sector activity growth modestly slowed, although median forecasts envision a print broadly in line with the medium-term trend.

The results are likely to pass mostly unnoticed. If UK voters opt for “Brexit”, the Euro looks decidedly vulnerable to aggressive volatility. If “Bremain” wins the day, the ECB is likely to remain in wait-and-see mode as it continues to implement stimulus measures announced earlier in the year. In this scenario, near-term activity data seems largely moot.

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Asia Session

GMTCCYEVENTACTEXPPREV
01:30JPYBOJ’s Kiuchi Speaks in Kanazawa ---
01:45CNYMNI June Business Indicator 54.5-50.0
02:00JPYNikkei Japan PMI Mfg (JUN P)47.8-47.7
05:00JPYLeading Index CI (APR F)-100.5
05:00JPYCoincident Index (APR F)-112.2

European Session

GMTCCYEVENTEXPPREVIMPACT
07:00EURMarkit France Mfg PMI (JUN P)48.748.4Low
07:00EURMarkit France Services PMI (JUN P)51.651.6Low
07:00EURMarkit France Composite PMI (JUN P)51.050.9Low
07:30EURMarkit/BME Germany Mfg PMI (JUN P)52.052.1Medium
07:30EURMarkit Germany Services PMI (JUN P)55.055.2Medium
07:30EURMarkit/BME Germany Composite PMI (JUN P)54.354.5Medium
08:00EURMarkit Eurozone Mfg PMI (JUN P)51.451.5Medium
08:00EURMarkit Eurozone Services PMI (JUN P)53.253.3Medium
08:00EURMarkit Eurozone Composite PMI (JUN P)53.053.1Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.10881.11891.12431.12901.13441.13911.1492
GBPUSD1.44441.45761.46411.47081.47731.48401.4972

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

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