The Euro was under intense pressure falling below 1.32 as the data from Europe overnight was very disappointing with the Markit PMI’ all lower than they were last month. Indeed as you can see in the chart below the US manufacturing PMI although still nicely above the 50 expansion line was also lower. This highlights the fact that the data flow over the past few weeks across the globe has been on the weaker side of expectations as we saw reinforced again last night with the PMI’s and the Philly Fed survey which was expected to bounce from last month’s -5.8 to +1 by the punditry but instead printed at -12.5 for a shocker of a result. Even initial jobless claims which had been a positive for a while now jumped 20,000 from last week to 362,000 overnight.
But it is Europe and the Euro which was the big overnight loser with European stocks smashed lower Milan was the stand out looser dropping 3.13% as the proximity of the election weighed. Madrid was 1.81% but the CAC in Paris was sold heavily with a loss of 2.29% while in Frankfurt the DAX fell 1.87% and in London the FTSE was 1.62% lower.
The Euro itself lost 0.86% and sits at 1.3168 this morning more than 1 big figure below the high of the day. As you can see in the chart above the Euro has decisively broken down through the recent uptrend and it looks biased lower still.
The Fed’s little bit of uncertainty about the timing of the withdrawal of the stimulus and the fact that they are talking about it is of itself good for the US dollar. Add in a bit of instability in the Equity markets around the globe and you get a bit of a safe haven bid for the US dollar and also for gold as we saw overnight.
As you can see in the table above the USD has done pretty well for the second day in a row. Sterling was absolutely crushed in afternoon Asian trade but found some buyers in the 1.5130′s and they chased it all the way back to 1.5249 for a gain of 0.11%. USDCHF rose 0.43% and the Aussie dollar was under pressure as well falling to 1.0225 as we write.
Gold tested but was unable to break up the down trend overnight. But it took a bid tone from the equity sell off. If this is the new market meme for a while then Gold’s weakness should be over for a little while and if it can break back into the recent down trend it has the potential for a substantial rally. Perhaps even $50.:
The Aussie is interesting for the safe haven believers because if their idea had any real traction the Aussie would be higher along with the USD not under pressure to break lower as it is at present. Support should be found in this 1.0215/25 zone if it is not to break back down toward the 1.0140 region. Today we don’t have a strong view and will step aside unless 1.0215 breaks which might get us short.
The Yen is closing in on our our 91.90/92.30 support zone. We now expect it to break lower but we’ll have to wait and see.
Catch me on Twitter @gregorymckenna
Morning Report - Euro crushed, Sterling bounces, Aussie at risk of a break lower
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