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Euro softens ahead of Eurozone PMIs

business-articlesEuro softens ahead of Eurozone PMIs
  • Improved Eurozone manufacturing and services PMIs could boost euro

  • US dollar vulnerable to slowing retail sales

  • Pound remains under pressure from Brexit uncertainty


Can euro shake off ECB caution today?

While the European Central Bank (ECB) took a more cautious view of the economic outlook at its December policy meeting the euro could find support today.
December’s Eurozone manufacturing and services PMIs may encourage EUR exchange rates to return to a stronger footing if growth picks up on the month.
Any signs of economic resilience should give the euro a boost, even though growth is still expected to ease in the fourth quarter as a whole.
If economic activity fails to strengthen on the month, however, EUR exchange rates could extend their losses this morning.

Weaker retail sales growth to dent US dollar

Confidence in the US dollar could deteriorate further this afternoon on the back of the latest advance retail sales data.
Forecasts point towards sales growth slipping from 0.8% to just 0.1% in November, pointing towards a lower level of consumer confidence.
This could weigh heavily on USD exchange rates today, with any fresh signs of domestic weakness likely to increase the case for the Federal Reserve to remain on hold in 2019.
As long as market risk appetite remains elevated this is also likely to limit the appeal of the US dollar.

Pound remains vulnerable to UK political developments

Political developments may provoke fresh volatility for the pound today, even though Theresa May’s position as leader of the Conservative Party is secure.
As May is still unlikely to get the proposed Withdrawal Agreement through a parliamentary vote market worries over Brexit persist.
Without evidence of any concessions from EU leaders or assurances over the controversial Irish backstop the agreement looks set to fail.
This prospect raises the risk of a general election, no-deal Brexit or even a second referendum; events which all carry a significant risk premium for the pound.

Upcoming Data:

Friday, 14th December 2018
09:00 EUR Eurozone Manufacturing PMI
09:00 EUR Eurozone Services PMI
13:30 USD Advance Retail Sales

Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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