After a flat week of virtually no economic data, we’ll be treated to a raft of EU Purchasing Managers’ Index survey data tomorrow. And perhaps more surprisingly, it’s expected to show improvement from last month’s frankly abysmal levels. It’s important to bear in mind, that even if the data comes in as expected, a good deal of it is below the 50.0 neutral reading and therefore signals contraction. We imagine this more optimistic forecast of the PMI data is partly due to the fact that Germany is projected to have missed recession in Q3, albeit by a whisker. This sounds like upbeat news until you consider that a recessionary signal may have been enough to remove German objections to a fiscal investment package. Perhaps not so much now…
Bottom line: The European Central Bank is still going ahead with its QE stimulus package, which is great for asset prices but likely serves to contain the EUR in its gradual downward trajectory against the Dollar. Speaking of the ECB, its monetary policy meeting minutes will come out today and provide additional context to the forthcoming stimulus.
Cable found support at the 1.29 figure after falling from Monday’s 1.2985 high as it continues to trade in a tight range ahead of the UK general election. The pair could soon test Monday’s highs as the Dollar Index found resistance at its 100-daily moving average yesterday.
The currency cross has gradually ticked higher after finding support at 1.1650 yesterday. Both components have gained from a weaker Dollar in recent sessions, meaning moves in GBP/EUR are more subdued. The pair could test the 1.17 level again soon as the Euro Index hits resistance at the 50-daily moving average.
The common currency has traded in a tight range this week but may come under selling pressure as the Euro reaches the 50-daily moving average on a trade-weighted basis. The pair ticked higher in the London open following a weaker Dollar, reaching Monday’s high of 1.1090. A test of the 1.11 handle could occur soon.