The EUR and USD in the Spotlight ahead of Jackson Hole
Macroeconomic data out of the Eurozone this morning continued to signal positive momentum in the Eurozone economy, providing strong support to the EUR as private sector PMI numbers were largely better than forecasted, with Germany’s manufacturing PMI hitting a 2-month high according to prelim figures.
The stats come at a time of heightened uncertainty as the markets prepare for tomorrow and Friday’s gathering at Jackson Hole, where both FED Chair Yellen and ECB President Draghi are scheduled to speak.
We had seen the EUR on the back foot over the last week as the markets were forewarned that Draghi would refrain from commenting on the ECB’s monetary policy outlook, but as we have seen on multiple occasions, circumstances may force the ECB President to make comment, on this occasion a stronger EUR raising the possibility of some dovish commentary to peg back any gains.
It’s yet unclear at what level Draghi will become concerned with regards to EUR strength, but one thing is likely and that will be the ECB President wanting to avoid any kind of a taper tantrum, removing the prospects of anything hawkish, leaving the EUR on the defensive ahead of Friday’s speech, the only possibility, other than dovish commentary, being a lack of commentary on monetary policy.
At the time of the report, the EUR was up just 0.10% at $1.17782, giving up gains off the back of the private sector PMI numbers, the EUR having hit an intraday high $1.1794.
With the FED Chair also scheduled to speak over the 2-days, comments from Yellen will more than likely influence the Dollar, which could see the EUR make further gains, should the FED Chair retain her dovish sentiment towards inflation and ultimately the outlook on rates through to the end of the year.
It will certainly make for an interesting 2-days to round off the week.
Ahead of Jackson Hole meetings, which start tomorrow, macroeconomic data out of the U.S later today include July’s new home sales and more importantly, August prelim manufacturing and service sector PMI numbers. Service sector data will be the key driver this evening, but the markets will also be looking for positive figures out of the manufacturing sector, following relatively upbeat numbers out of New York State and Philly last week.
Based on forecasts, the stats should be Dollar positive, though as we have seen throughout the year, it’s no longer down to the numbers, with the markets having to not only juggle the FED’s constant shift in policy outlook, but also noise from Capitol Hill, which continues to be Dollar negative.
At the time of the report, the Dollar Spot Index was down 0.12% at 93.432, recovering from an intraday low 93.356 hit on release of the Eurozone PMI figures, with today’s stats likely to pull the Dollar back into positive territory by the close.
It’s all going to boil down to who takes the more dovish path, Draghi or Yellen and Trump may well be sitting with phone in hand, ready to Tweet just in case the Dollar begins to rally…
This article was originally posted on FX Empire
