This morning saw data from the Eurozone post slightly below expectations

Fundamental View

Yesterday saw the majority of US data come in mixed and we saw this translate into pendulum trades in US equities, swinging from gains to losses. We saw crude oil continue its march higher and break the $50bblhandle which has allowed the bullish sentiment to continue into this morning’s trade. The manufacturing space was, globally, softer than the majority of analysts expected, prevalent in the ISM Manufacturing number which fell below the previous figure and the current expectation. The dollar, as expected, softened into the session and reached our target. We received word that the new Greek government have prepared a proposal to confront the debt stand-off. Plans to exchange current outstanding debt for new issues linked to growth were the headline contingencies, including targeting wealthy tax-evading Greek nationals. This caused some minor disturbances as analysts’ worries regarding the chance of a Greek exit were temporarily rekindled. However this move was strongly offset by weaker than expected US data and the resulting interpretation priced the US slowdown ahead of near-term Greek risk. We saw equities lifting into the latter half of the session, with morning headline news from BP and British Gas cutting capital expenditure due to the cascading price of oil. Although we have seen a rebound in recent days, the size of the sell-off in the second half of 2014 still affects corporate profits in the oil and gas space and so the reduction of capital expenditure has been taken as a relief move.

Today’s View

This morning saw data from the Eurozone post slightly below expectations, PPI for Europe posted a reading of -1.0% against an expected -0.7% and Italian inflation print -0.6% against the expected -0.3%. This has seen a negligible effect in the EURUSD as we have seen much of the poor data from this week simply absorbed by price action. The poor manufacturing data from yesterday and the poor data from this morning would regularly have seen bids going into the dollar as many traders quickly position themselves for a global risk phase but in this instance we are seeing many traders unwinding their dollar trades, a move picked up on yesterday but continuing throughout this morning. We also saw UK post Construction PMI numbers with a reading of 59.1 vs the expected 57.0; this resulted in a big push into sterling strength and allowed the continuation of the unwinding of the dollar long trade. The large push higher in equities this morning seems to have maintained its eagerness to press on as we see the S&P 500 trading well above yesterday’s high at 2018.50. We have ISM New York and Factory Orders due this afternoon, the latter being for December. We also have Durable Goods revisions which could provide some scope for dollar trading as a particularly disappointing Durables number was posted last week. Any numbers widely outside of expectations should get the dollar-denominated currency pairs moving and traders are encouraged to monitor levels of technical significance in search of entries.