Mixed data overnight has thrown the majors for a loop, with recent underperformers the Australian Dollar and the British Pound as top performers by mid-morning in Europe, while the recently strong Euro and Japanese Yen are the worst performers. As always, the start of a new month brings about the ever-important PMI surveys. Here’s where they fell to provoke a shuffle among recent best/worst performers in FX:
– Australian PMI Manufacturing (JUL): 42.0 from 49.6
– Chinese PMI Manufacturing (JUL): 50.3 versus 49.8 expected, from 50.1
– Euro-Zone PMI Manufacturing (JUL F): 50.3 versus 50.1 expected unch
– UK PMI Manufacturing (JUL): 54.6 versus 52.8 expected, from 52.9
While the Australian and Chinese data have produced only a modest move higher by the Australian Dollar, focus today is centered around the British Pound and the Euro ahead of the Bank of England and European Central Bank policy meetings today, respectively. Both currencies were hampered by the introduction of “forward guidance” at the July meetings, and today could see similar results, depending on what point of view each central bank takes.
Overall, for the both the BoE and the ECB, it boils down to this: will the focus be on the upswing in recent growth prospects (bullish for the EUR and GBP); or will it be on ensuring interest rates stay lower for an extended period of time (bearish for the EUR and GBP).
Read more: Join Currency Analyst Christopher Vecchio to discuss the BoE at 06:45 EDT/10:45 GMT
Taking a look at European credit, peripheral yields continue to edge lower ahead of the ECB – a sign of dovish expectations. The Italian 2-year note yield has decreased to 1.523% (-2.1-bps) while the Spanish 2-year note yield has decreased to 1.858% (-2.0-bps). Similarly, the Italian 10-year note yield has decreased to 4.369% (-3.2-bps) while the Spanish 10-year note yield has decreased to 4.618% (-2.1-bps); lower yields imply higher prices.
RELATIVE PERFORMANCE (versus USD): 09:30 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.08% (+0.81% prior 5-days)
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
By Christopher Vecchio, Currency Analyst