The euro was hit from all sides today. First, German PMIs were mixed with the data showing improvements in the manufacturing sector and deterioration in services. Later on, the Eurozone PMIs confirmed that the region as a whole grew at a slower pace due to a continued contraction in manufacturing and slower expansion in services. In between, ECB President Christine Lagarde described the global economy as marked by uncertainty and called for Europe to develop a new policy mix that includes fiscal stimulus. This suggests that regardless of her bias for monetary policy, she feels that the Eurozone needs more policy support. This outlook combined with better than expected US Markit PMIs and an upward revision to the University of Michigan consumer sentiment index was enough to drive EUR/USD below 1.1050. A test of 1.10 appears likely with a further move lower if the IFO report, EZ confidence or CPI numbers surprise to the downside.

The gains in the dollar were not limited to the euro. In fact, the greenback traded higher against most of the major currencies today. The New Zealand dollar was the lone exception. The rally in the greenback should surprise no one as it comes off the heels of brighter, less dovish FOMC minutes. President Trump's comment that a trade deal with China is "very close" also helped USD/JPY. Its too early to say but it looks like Trump is trying to separate the trade deal from the HK bill. While Markit PMIs are less market moving than ISM, the latest reports show faster growth in the manufacturing and service sectors this month. The persistent gains in US stocks also helped to bolster market sentiment. Looking ahead, there are very few market moving economic reports on next week's calendar. Thanksgiving is on Thursday, which means that it will be a shortened week for most US traders. With that said, central bank speak and trade headlines could rock the FX markets. Fed Chairman Powell speaks on Monday, RBA Governor Lowe speaks on Tuesday and RBNZ Governor Orr delivers a press conference on the Financial Report Wednesday local time.

The worst performing currency today was sterling, which fell hard on softer PMIs. According to the latest reports, the slowdown in the UK economy deepened in the month of November. Manufacturing and service sector activity contracted, driving the composite PMI index to its lowest level since Britain voted to leave the European Union in July 2016. This is consistent with our view that the decision to leave the EU will lead to ongoing pain for the UK and the worse may be yet to come. GBP/USD dropped below the 20-day SMA, opening the door for a deeper move below 1.2700. If the data continues to deteriorate, the Bank of England could resort to an early 2020 rate cut. 

The Canadian dollar traded lower despite better than expected retail sales. Consumer spending contracted in September, but the decline was less than expected. Better yet, excluding autos, spending increased by 0.2%. These numbers along with the uptick in consumer prices and less dovish outlook from Bank of Canada Governor Poloz should have cemented the top in USD/CAD. However, the pair recovered its earlier losses to end the day in positive territory. Part of this was driven by the slide in oil prices but the main reason for the pair's gains is the recovery of the US dollar. USD/CAD will remain in play next week with quarterly and monthly GDP numbers due on Friday.

The manufacturing and service sectors in Australia are contracting according to CBA and this deterioration explains why the Australian dollar has been on its backfoot throughout the week. While the pair remains firmly confined in a tight .6835 to .6770 range, it is hugging the bottom end of this band. The New Zealand dollar on the other hand was the only currency to outperform the greenback. Considering the lack of NZD news, this could be driven entirely by AUD/NZD flows. The RBA and RBNZ's diverging outlook drove AUD/NZD to its lowest level since August.

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