GBP slips after Construction PMI survey shows fall into contractionary territory, while EUR grinds higher on today’s huge EUR 3bln option expiry

Antipodeans (AUD, NZD): The RBA was the headline of the Asian session, where rates were kept on hold at 1.50%, as expected. Concerns of the economy continued, with the bank stating that a strengthening AUD would slow economy and restrain price pressure. Further reiterating ‘it judges steady policy is consistent with the growth and inflation target. AUD saw a bearish push on the comments, as the growing currency concerns further diminish the likelihood for a RBA move. AUD/USD slipped through 0.78 and looks back toward the 2016 trading range. Kiwi suffered overnight and has been the underperformer today with the New Zealand NZIER Confidence fell to an 18-month low, triggering some early Asian selling. A relatively uninspiring GDT
auction where the price index slipped over 2.4%, WMP fell 2.7% against expectations of a rise of circa 4-6%. This is also coupled with the political concerns in which investors will be eying the special votes count on Friday.

EUR: Little in the way of newsflow out of Europe, while German participants had been away from markets due to unity day. Interestingly, EUR had grinded higher throughout the session with focus on today’s huge EUR 3bln option expiry, which had magnetised price action to 1.1750.

GBP: Slightly softer today (-0.15%), following the surprise fall into contractionary territory in the latest Construction PMI reading (lowest in 13 months), which saw GBP offered 30 ticks or so. Concerns still remain over Brexit with comments from EU’s Barnier stating that there is still a serious divergence on the Brexit bill. However, GBP did pull back from worst levels amid a slight dip in the greenback, which had fail to make a firm push through 94.00.


Dollar Index H4

I am going to treat the recent move higher as a breakout even though I usually like to see a significant high above the top of the range. Sometimes price can be sneaky. I expect to see price head to the weekly target. Also the fundamental reasons for Dollar strength have not changed so there does not seem to be a reason for Dollar weakness in the near term. At least until Friday's NFP.

US10Y H4

Price remains range bound. Our previous analysis yesterday still applies. Bears are looking for a break below the highlighted green zone and bulls are looking for a break above WM3.

S&P 500 H4

Another record day for the S&P500 as we continue making higher highs.

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