Euro loses further ground on major pairs as investors brace for a dollar bull run

Claire Hogarth05/Aug/2014Currency Updates

GBP

Sterling began the day trading within tight ranges against both Dollar and Euro before gaining ground on both as the day wore on, reversing it’s downward trend over the previous 10 days.

London closed with the pound up .2% against the Euro and .1% on the dollar off the back of declining but above expectation PMI Construction figures for July, coming in at 62.4 against 62 called.

Though this represented a .2 drop from June’s number, residential house-building reached its fastest growth rate in over a decade. Hiring in the construction industry also reached an all time high in the survey reflecting the sector’s booming confidence. Sterling took further gains over the Asian trading session capitalising on the lack of data from the US and the Euro seeing increasing drops within the Sentix index of investor confidence, falling to 2.7 from 10.1 last month.

Today we have UK Markit Services PMI being released at 8:30 GMT with the market expecting a slight up-tick. We then have reams of minor data tomorrow and the BoE IR decision on Thursday.

EUR

The Euro dropped against the dollar before retracing slightly with a .1% drop for the day.

The Spanish Unemployment survey for July registered at a disappointing -29.8k, a serious drop off from June’s -122.7k and the market consensus prediction of -116.3k. This is however the sixth consecutive month where the number of Spaniards claiming unemployment benefits has fallen, with the cumulative reduction in unemployment over the first seven months of the year at its largest since 1998.

Meanwhile both Bond prices and European bank stocks rose after the Portuguese government announced its intention on Sunday to rescue Banco Espirito Santo with a €5 billion refinancing program to prevent the destabilisation of Portugal’s banking sector by ring-fencing the bank’s good assets into a new bank called Novo Banco, separating depreciating assets into a ‘bad bank’ which will be wound down over the next decade.

Markit Services PMI for Spain, Germany, Italy and France, as well as the Eurowide composite this morning, though this is less influential than the equivalent Manufacturing survey.

Later in the morning we have Eurozone wide retail sales and Portuguese unemployment data, and then little data of note until Draghi speaks on Thursday.

USD

Mixed day for the dollar, as it regained some of the ground lost to the Euro following last week’s below expectation NFP’s but slipped slightly against Sterling and a number of G10’s due to the usual post-payrolls data lull. The ISM New York Index jumped from 60.5 to 68.1 for July reflecting the positive outlook on the East coast, whilst the S&P 500 edged up following its worst week since 2012.

The market outlook for the dollar is increasingly bullish as aggregate net futures positions turned positive for the first time since April against its 8 major trading pairs. Euro looks likely to be hit hardest as fears mount over the extent to which the Eurozone and in particular Germany will suffer from the sanctions imposed on the major Russian banking institutions.

Today we have ISM Non-Manufacturing PMI for July with many predicting a strong showing to build on June’s 56 reading. Additionally there will be the monthly Composite Report from Markit and Factory orders data for June.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.