Over the past 24 hours traders’ focus has been on the European majors as both the Euro and the Pound were expected to have fresh news that could provide opportunities and attractive price action. The release of the PMI levels from the Euro-area and the Retail Sales figures from the United Kingdom were the order of the day and indeed we got some new indications on how the majors intend to trade moving forward.
Starting from the Euro, the release of the Manufacturing and Services PMI reports from Germany and the Euro-zone printed in a mixed manner taking away any hopes for an immediate bounce back up in the currency that has been under pressure throughout the week. The actual numbers were not disappointing or anything but the mere fact that we saw mixed performance among countries and sectors didn’t help the currency to rally.
However from a technical perspective the Euro still has the opportunity to correct to the upside mainly due to two factors: the 1.1100 area proved to be an area of sufficient support that arrested the currency’s decline earlier in the week and at the same time the momentum that drove the Single currency lower seems to have died away.
So even though we don’t think there’s any fundamental reason for the Euro to move higher we cannot exclude a technical correction towards the 1.1200 area. This will ultimately come down to the release of the IFO Survey this morning, the report is expected to print lower than last month so even though the technical indications suggest a correction the Euro might end up spending the day between 1.1100 and 1.1150.
The Cable on the other hand had a more straight-forward trading day as its domestic Retail Sales report was clear in its findings. The report printed strong and revealed an uptick in the domestic consumer demand, which is only natural after a period of encouraging wage growth and lower gas prices. On a monthly basis Retail Sales soared 1.2% higher against expectations for a flat 0.2% reading.
The UK currency rallied to 1.5680 where we find it this morning and this development ties along nicely with the bullish tone in the BoE minutes earlier this week. This could allow the Cable to extend its gains today especially if the Public Sector Borrowing levels improve or BoE Governor Carney hints towards a rate hike sooner than later during his panel appearance in Portugal.
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