General market theme
The fundamental environment has been quite tricky these past weeks with data beating or missing expectations and sentiment in the markets changing from one day to the other as the broader financial stage in a global level is rocking from side to side. This past week it was the dollar that came under pressure suddenly as investors were quite hesitant to bet in favor of the US currency after the recent Fed meeting and on Friday fresh data from the States confirmed their concerns showing weakness across the board. The Fed might be the only major central bank thinking about raising rates but it seems that investors consider this a far-fetched possibility and each time US data misses the dollar takes a beating.
Price action highlights
The euro extended its recent rally to the upside and after moving to the 1.1100 area post-FOMC the currency rate managed to go all the way to the 1.1200 level after the US data on Friday disappointed dollar bulls. It seems that the euro area is faring better than expected post-Brexit decision at least for the time being which allows the euro to capitalize on recent disappointing reports from the US. Whether the single currency will manage to hold on its gains is another question though and it depends on how the dollar will trade ahead of this week’s NFP report which doesn’t look that promising.
The cable also benefited from the dollar’s recent weakness on Friday and was able to edge higher to reach the 1.3300 level after having retreated below the 1.3200 area earlier in the week. The pound though is not easy to attract investors’ confidence and after the initial reaction the UK currency settled a bit lower on Friday and today’s Manufacturing PMI report could be a threat for the pound as early signs of weakness post-Brexit decision could send the rate lower once again with the 1.3150 area being the first stop.
Focus of the day
A few interesting reports on our calendar today with manufacturing data coming in from around the globe. The Eurozone Manufacturing PMI levels will be released this morning and the UK data will follow soon after that while last in the afternoon the US will release their own data for the manufacturing sector. UK weakness could put the pound under pressure again but we also need to be vigilant in case the US data disappoint again.
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