Forex: Euro May Rise on PMI Data, Dollar Eyes Jackson Hole Summit
The Euro may rise as Augusts’ flash PMI roundup bolsters ECB policy expectations. The US Dollar looks to the Jackson Hole Summit to drive Fed “taper” speculation.
Talking Points
Euro Expected to Rise if Flash PMI Roundup Weights Against ECB Easing Bets
US Dollar Looks to Jackson Hole Summit to Inform Fed QE “Taper” Outlook
Australian Dollar Outperforms as HSBC’s China PMI Gauge Tops Expectations
Augusts’ roundup of preliminary Eurozone PMI figures headlines the economic calendar in European trading hours. Expectations call for the region-wise composite gauge to show growth in manufacturing- and service-sector activity accelerated from the prior month, yielding the best reading in a year. Eurozone economic news-flow has steadily improved relative to expectations since late April, suggesting forecasters continue to underestimate the extent of recovery underway in the single currency area. This opens the door for an upside surprises as today’s data set crosses the wires. The Euro continues to broadly track the relative monetary policy outlook, suggesting a stronger PMI outing is likely to be supportive in terms of reducing ECB interest rate cut speculation.
Later in the day, the spotlight shifts back to Federal Reserve policy concerns. Price action in the wake of yesterday’s release of minutes from July’s FOMC meeting suggests traders interpreted the outcome as somewhat hawkish, but details of the report do little to counter status-quo forecasts calling for a $10 billion cutback in asset purchases at the September sit-down of the rate-setting committee. All eyes now turn to the Jackson Hole Economic Summit. The symposium features an appearance from Janet Yellen, currently the Fed’s Vice Chair and one of the leading candidates to replace Ben Bernanke when his tenure ends in January 2014. If Yellen is indeed chosen to take the reins next year, it will be up to her to manage the Fed’s move toward monetary policy normalization. With that in mind, traders will be keen to hear what she has to say on the matter of QE “tapering”.
The Australian Dollar outperformed in overnight trade after the HSBC Chinese Manufacturing PMI gauge unexpected printed above the 50 “boom-bust” threshold in August, showing the factory sector expanded for the first time in four months. The print reinforced recent improvement in economic news-flow from the East Asian powerhouse, underpinning speculation that stabilization there will bolster the demand outlook for Australian commodity exporters and limit the scope for further RBA interest rate cuts. As it stands, trader are pricing in no further easing over the coming 12 months. We continue to hold a long AUDUSD position.
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Asia Session:
GMT | CCY | EVENT | ACT | EXP | PREV |
0:00 | Conference Board Leading Index (JUN) | -0.2% | - | 0.0% | |
1:45 | CNY | HSBC/Markit Flash Manufacturing PMI (AUG) | 50.1 | 48.2 | 47.7 |
Euro Session:
GMT | CCY | EVENT | EXP/ACT | PREV | IMPACT |
6:00 | Trade Balance (CHF) (JUL) | 2.60B | 2.82B | Medium | |
6:00 | CHF | Imports (MoM) (JUL) | - | -3.2% | Low |
6:00 | CHF | Exports (MoM) (JUL) | - | 2.3% | Low |
6:00 | Machine Tool Orders (YoY) | - | -12.1% | Medium | |
7:00 | French PMI Manufacturing (AUG P) | 50.2 | 49.7 | Medium | |
7:00 | EUR | French PMI Services (AUG P) | 49.2 | 48.6 | Medium |
7:30 | EUR | German PMI Manufacturing (AUG A) | 51.1 | 50.7 | High |
7:30 | EUR | German PMI Services (AUG A) | 51.7 | 51.3 | High |
8:00 | EUR | Euro-Zone PMI Manufacturing (AUG A) | 50.7 | 50.3 | High |
8:00 | EUR | Euro-Zone PMI Services (AUG A) | 50.2 | 49.8 | High |
8:00 | EUR | Euro-Zone PMI Composite (AUG A) | 50.9 | 50.5 | High |
Critical Levels:
CCY | SUPP 3 | SUPP 2 | SUPP 1 | Pivot Point | RES 1 | RES 2 | RES 3 |
1.3191 | 1.3282 | 1.3318 | 1.3373 | 1.3409 | 1.3464 | 1.3555 | |
1.5514 | 1.5594 | 1.5629 | 1.5674 | 1.5709 | 1.5754 | 1.5834 |
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak
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