Euro stalls GBP's bounce post a strong UK Construction PMI print

Fundamental View

Yesterday saw US data post slightly mixed with some misses on the headline prints. We saw Personal Income and Spending underperform the analysts’ estimates, with the ISM Manufacturing number printing unchanged on the month but below the estimate of 37.5. Manufacturing PMI rose to 55.1, adding to the general confusion. The undecidedness resulted in mild dollar strength, allowing the EURUSD to remain contained within its range from 1.1250 to 1.1161. We also saw safe haven Government bonds make a leg to the downside, allowing yields to rise 0.354% in the German 10yr and US 10yr notes peaking at just over 2%. Many participants were worried regarding the ISM manufacturing number after the low Chicago PMI print from last week and the move lower in T-note prices was attributed to the ISM number reading relatively in-line with expectations. In addition to this we saw US equities make a leg higher on the back of a medium-term push in Apple market cap forecasts, being the first company in history to have a potential capitalisation of $1 trillion. This has assisted US bourses in remaining buoyant and allowed the NASDAQ to push higher, bringing the S&P 500 with it, the latter trading 2115.50 into the US close. Overnight we had news that the Reserve Bank of Australia kept interest rates unchanged in a bid to prevent growth of house prices spiralling out of control. This provided one of the better moves in the Asian session as the AUDUSD appreciated to 0.7850 before retracing slightly lower as participants took profit and short sellers returned, pricing in lower growth and demand for Australian industrial exports.

Today’s View

Today we have seen the continuation of the bond move lower with both T-notes and Bunds on their lows. The UK Construction PMI printed higher at 60.1 against the expected 59.0. We saw the GBPUSD lift on the back of this but the data had little overall effect as the mild dollar strength play prevailed against the majority of pairs, the fall in EURUSD capping the attempted rebound in GBPUSD. We also saw Eurozone PPI for January underperform, allowing the Euro weakness trade to continue and act as a preventative measure across all currencies paired with the dollar. Ahead we have little in terms of US data other than the ISM Ney York figure due at 1445 GMT. As this is the only real headline for the afternoon this could have added weight for today so traders are encouraged to remain conservative trading the session ahead, looking for limited targets.