Kantox currency update: euro dives on concerns about the EU economy
The euro dropped across the board on Thursday, hammered by news reporting that Italy’s economy fell into recession in the last quarter of 2018 and that the German economy is expected to grow in 2019 at its slowest pace of the last six years.
The rest of the majors have remained trading within recent ranges, with the US dollar slightly weaker against the Japanese yen, weighed by the dovish turn observed at the Fed’s latest monetary policy meeting.
EUR/USD retreats from 1.1515 highs to 1.1450. The euro retreated on Thursday, putting an end to a five-day rally and dropped from 1.1515 highs, returning to 1.1450 area. As at London market opening times, the EUR/USD is trading at 1.1445.
GBP/USD: hovering around 1.3100. The pound has been moving between 1.13050 and 1.3150, consolidating near three-month highs after having posted a 4% rally this month, with the market focusing on the Brexit developments. As at London market opening times, the GBP/USD is trading at 1.3100.
USD/JPY hits fresh two-week lows at 108.50. The US dollar retreated for the second consecutive day on Thursday, under pressure after the Fed’s dovish monetary policy meeting, to extended its reversal from last week’s highs at 110.00 to 108.50 low so far. As at London market opening times, the USD/JPY is trading at 108.95.
In the Calendar Today
Today in the Eurozone, the Markit Manufacturing PMI is expected to confirm that economic activity in the sector dropped to a 50-month low of 50.4. The market has already assumed these figures, thus, the impact on the euro will be limited
Somewhat later in the UK, the Markit institute will release the UK Manufacturing PMI Index. Business activity in the sector beat expectations and rose to a six months’ high in December. If the trend continues in January, it might have a positive impact on the pound.
The event of the day, however, will be the US Non-Farm Payrolls report will show the trends of the labour market. After the bright reading seen in December, Non-farm employment is expected to have increased at a slower pace in January. After the Fed’s dovish turn, a weaker than expected employment report might increase negative pressure on the USD.
Finally, the ISM will release the US manufacturing PMI index. According to the Preliminary Markit PMI, the sector’s activity accelerated in January thanks to a robust increase in the production and confidence sub-indexes. If these prospects are confirmed, they might have a bullish impact on the dollar.
09:00 GMT EZ: Markit Manufacturing PMI. (Jan)
Previous: 50.5 Consensus: 50.5
09:00 GMT UK: Markit Manufacturing PMI. (Jan)
Previous: 54.2 Consensus: 53.5
13:30 GMT US: Non-Farm Payrolls. (Jan)
Previous: 312K Consensus: 166K
15:00 GMT US: ISM Manufacturing PMI. (Jan)
Previous: 54.3 Consensus: 54.2