EUR/USD nears 2017 top
|Overnight, the dollar shows no clear trend even as risk sentiment stays positive. USD/JPY holds in the lower half of the 112 big figure. EUR/USD hovers in the mid 1.20 area. Today, German labour data are expected to improve further with the unemployment rate declining to 5.5%. The US manufacturing ISM is expected unchanged at a high 58.2. (FX) traders will keep an eye at the price indicators of the report. This evening, the minutes of last month’s FOMC meeting will be published. Markets will also look for the Fed’s assessment on ongoing low inflation. At least, it didn’t cause a major change to the 2018 Fed dot plot.
Recently, the dollar suffered as the global recovery could force other major CB’s (including ECB) to join policy normalisation. Today’s data probably won’t change market sentiment. That said, good US data might slow the recent USD decline ahead of Friday’s payrolls. It also won’t be that easy for EUR/USD to set new cycle high without really high profile news. At the same time, higher core yields and/or a risk-on sentiment as such were not enough to support the dollar of late.
Global picture USD: The outcome of the Dec Fed & ECB meetings didn’t provide directional guidance for EUR/USD. A narrowing in the (LT) interest rate differentials finally propelled EUR/USD to the topside of the 1.1554/1.2090 range end 2017. A sustained break would improve the ST picture. For now we don’t preposition for such a break. Quite some good news on the euro/bad news on the dollar should be discounted at current levels. Price data remain in focus.
EUR/GBP tried to regain the 0.89 mark yesterday on a softer than expected manufacturing PMI, but the attempt failed. Today, only the UK construction PMI is on the agenda (expected little changed at 53). More technical trading might be on the cards. A slowdown of the EUR/USD rally might cap the topside of EUR/GBP short-term.
Global picture EUR/GBP: The EUR/GBP decline stalled even as the EU agreed to start the next stage of Brexit negotiations. The pair settled in a 0.8760/0.8960 consolidation range. Recent UK data were mixed. We don’t expect the BoE to raise interest rates anytime soon. The EUR/GBP 0.8700/60 support looks solid. Ongoing euro strength or soft UK data might keep EUR/GBP 0.90 on the radar further down the road. We keep a EUR/GBP buy-on-dips approach in case of return action to the 0.87 area.
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