EUR Hit From All Sides – ECB, PMIs, Good US Data

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. It's 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, the 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.

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