[B]- Australian Dollar: RBA Stays pat as expected
- Euro: Manufacturing PMI just misses but remains strong
- British Pound: Construction PMI stays hot but mortgages decline
- US Dollar: ADP to clue in NFP?[/B]
Euro and Pound Lower on Neutral Data
The EURUSD came under a heavy pressure at the end of Asia trade today as the pair dropped below the key 1.3585 level and triggered a wave of stops tumbling all the way to 1.3560 before finally stabilizing. The European economic calendar was decidedly uneventful tonight with Manufacturing PMI and German unemployment the main points of interest to traders. PMI essentially matched last months numbers printing at 55.4 which was just a bit worse than market forecast. This was the 22nd consecutive month of expansionary data out of the Eurozone offering further evidence that the regions industrial sector remains healthy, most particularly the employment component which has inched up to a year high reading of 53.5. Nevertheless, the main takeaway from the report by the currency market was that EZ manufacturing growth has peaked and the twin headwinds of a strong euro and higher energy prices will likely act as drag on the sector going forward.
The EURUSD also appears to be still absorbing the twin shocks of horrid German Retail Sales on Monday and the surprisingly strong ISM Manufacturing results from US yesterday. With euro positioning woefully extended to the long side after rallying for 5 straight weeks, the pair was due for a correction and so far this weeks data has provided the prefect excuse for profit taking. Whether the turn in the EURUSD will lead to a more meaningful correction depends almost entirely on US employment data due this Friday. If NFPs continue to show 100K+ growth , the dollar bears calls of an imminent recession will prove to be premature, and the greenback could retrace all the way to the 1.3400 level. With news from the EZ essentially neutral, suggesting that at least for now 4% will be the cap to ECB rate hikes, the main support for future euro gains will not come from the currencys own performance but from further deterioration in US data which for now remains impressively resilient. Todays ADP report may shed some light on Fridays numbers, although given the wide disparity between the two releases, the market is likely to take todays reading with some amount of skepticism.
Much as expected UK Construction PMI printed above forecast as the countrys blazing housing market continues to drive that sector. However, todays data also brought news that housing demand may be finally cooling. UK BoE mortgage approvals dropped to their lowest level this year at 111k vs. 117K projected. Double digit price gains and higher rates are beginning to restrain UK consumers and that suggests that the BoEs expected May rate hike will be its last for at least the next few months