General market theme
Strong reversals at the beginning of the week, with the US dollar giving up its recent gains against the rest of the major currencies. The US currency had climbed higher against the likes of the euro and the pound at the end of last week, but yesterday the European majors reversed their flows and pushed higher.
The reversal could have been triggered either from today’s PMI reports from the euro area that investors expect to print in a robust manner, or once more doubts are creeping in on whether the dollar can get another rate hike this year to justify its strength.
As we already mentioned, today’s focus will be on the release of the PMI reports from the Eurozone, and we’re keen to see how the Brexit volatility has affected the region, with rumors making word for a positive reading that should keep the euro bid.
Price action highlights
The euro reversed its flows yesterday as we mentioned above, and after dropping below the 1.1300 level during the overnight Asian session the currency made its way back above this pivot level.
The euro enjoyed a nice rally yesterday, and this morning it’s trading just shy of the 1.1350 level ahead of the release of the PMI levels from the euro area. A possible robust printing should propel the single currency further to the upside to retest its recent highs, and it will be interesting to see whether the euro can go all the way.
The cable was also on the rise yesterday and climbed above the 1.3100 key figure once more after dropping lower at the end of last week. The UK currency pulled an impressive U-turn over the past 24 hours, and this morning we’re seeing the pound trading sharply above the 1.3150 level and contesting its recent highs around that area.
We’re not sure whether the pound can sustain these gains, and we think it’s important to keep an eye out for dollar’s return towards the end of the week ahead of fresh Fed-related events.
Focus of the day
The release of the Manufacturing and Services PMI reports from France, Germany and the Eurozone is the key event for the day, and the early releases should dictate the price action for the rest of the day. Later in the afternoon the Manufacturing PMI reading from the US shouldn’t affect the price action too much as investors are looking towards the end of the week for fresh dollar-related volatility.
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