Given the quiet data calendar in the latter half of last week, Monday has arrived with a collective search for trading motivation. While the US-China concerns have seemingly fallen into the background, US-Iran tensions have come to the fore. Each nation is carefully trying to articulate a willingness to speak without seeming desperate, so on net, little progress has been made. Meanwhile, Brent Crude, a key oil benchmark, flirted with the 200-day moving average support level over the past several sessions but has been rebuffed on each occasion. This means oil sits about 7.0% higher than before the Aramco drone attack, representing a drag on global growth and consumption. Perhaps the main reason for pessimism this morning is the terrible series of Eurozone Purchasing Manager Index survey figures. Each missed economist expectations, which shows a real decline in prospects in the bloc and focuses greater attention on the slow progress towards fiscal stimulus by member countries. To put this in perspective, the German Manufacturing PMI was the worst since June 2009.
Bottom line: Quite a few central bankers are speaking today and tomorrow, which will have the potential to move markets, although the risk-off tone that has started the week will be difficult to shrug off. The German Ifo business climate survey out tomorrow will be an interesting point of comparison for today's dire PMI readings.
Cable opened London trading with Sterling selling pressure as the pair dipped below Friday’s 1.2478 close. The trade-weighted Sterling Index finished last week above its 200-daily moving average, a level that could provide significant support for the currency over the short-term. UK PM Boris Johnson will be meeting European leaders this week, so headlines may bring intraday volatility to the pair in upcoming sessions.
Last week, the pair closed above the 1.13 barrier that was repeatedly a key resistance level at the beginning of the week. Weak European data on Monday morning may help the pair trade above 1.13 throughout the day, but Brexit headlines continue to make Sterling vulnerable to sharp dips.
So far this month, the pair has been rangebound between roughly 1.0900 and 1.1100. This trend could be tested this week as weak European PMI’s on Monday pushed EUR/USD to the lower end of the range. The trade-weighted Euro Index continues to sit near two-year lows as the end of Q319 approaches.
All content is written by the Global Reach Trading Desk. The opinions expressed are not the view of Global Reach Group and are not intended as investment advice.