Euro and US Dollar May Take Divergent Paths on PMI Data
TALKING POINTS – EURO, US DOLLAR, PMI, NEW ZEALAND DOLLAR, YEN
- Euro may fall on soft PMIs but follow-through may be lacking
- US Dollar down in APAC trade, PMI surveys may be a lifeline
- Yen down, NZ Dollar up as markets eye risk appetite recovery
Sentiment trends appeared to define FX market price action in Asia Pacific trade. Markets looked beyond a selloff across regional bourses that seemed to echo a negative lead from Wall Street to look forward, responding to signs of improving risk appetite on display in FTSE 100 and S&P 500 index futures.
The New Zealand Dollar led commodity currencies higher, with corrective flows following yesterday’s outsized selloff probably amplifying upside pressure. The anti-risk Japanese Yen underperformed. The US Dollar also fell, tracking a pullback in front-end Treasury bond yields.
Looking ahead, Eurozone PMI data headlines the data docket in European trading hours. The regional composite gauge is expected to show the pace of manufacturing- and service-sector activity growth slowed for a fifth consecutive month in June.
A downside surprise echoing recent disappointments in data outcomes relative to consensus forecasts might weigh on the Euro. Follow-through may prove lacking however considering such results’ limited implications for an already broadly dovish ECB monetary policy outlook.
Later in the day, the analogous US PMI figures enter the spotlight. Unlike the single currency area, news flow from the US has tended to top analysts’ projections, hinting their models underestimate the economy’s vigor and opening the door for another rosy outturn. That may help revive the greenback’s fortunes.
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ASIA PACIFIC TRADING SESSION
EUROPEAN TRADING SESSION
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.