So far this year, the Euro has been the best performing G10 currency which includes Sterling, US dollar, Japanese yen, Canadian dollar, Swiss franc, Australian dollar, Norwegian krona, New Zealand dollar and Swedish krona. The reason for this strength is down to the Eurozone economy which has been doing unexpectedly well this year with consistent growth reported in Germany, Spain, Italy, the Netherlands and even Greece……allegedly. So whilst Brexit has effected the Pound which has benefited the Euro, the main driving force for its strength is in its economic data.
Purchasing Managers’ Index data released from the Bloc yesterday showed that the data beat last months figure by a massive 0.1% in August with a reading of 55.8, up from 55.7 in July; better than economists had been expecting.
The data has been backed up by reports that the manufacturing sector in the Eurozone is apparently growing at its fastest pace since April 2011 and export orders are growing at their fastest rate since February of the same year.
The timing is somehow very good for the Eurozone which since the Brexit referendum has been working hard to keep the Bloc “project” on track. Whilst it is in the interest of the European Union to make Brexit look like a sham, the UK Government is making life tough for themselves as their Brexit plan remains unclear.
The EU has repeatedly stated that until sufficient progress has been made and negotiations have been resolved to a satisfactory level over the free movement of people, the border with Ireland and the €60 Billion divorce settlement, no talks on future trade deals can take place. More significantly, if this is still the case by October the talks will end leaving the UK Government no choice but to trigger a “Hard Brexit”.
Official data released form the US yesterday showed a poor start to the third quarter for US manufacturers as output fell from 53.3 in July to 52.5 in August according to Markit Economics, marking the third monthly fall in the past five months.
The services sector (index) however, rose firmly to 56.9 in August from 54.7 in July, well above consensus forecasts of 54.9 and was the strongest reading for 28 months.
8.00 am – 9.00 am – French, German and Eurozone manufacturing & Services PMI’s (August, flash): Expected to have eased off this month. Actual: All better than expected except for Eurozone Services which slowed slightly in August
2.45 pm – US Manufacturing & Services PMI (August, flash): Both expected to remain at last months levels. Actual: Manufacturing down, Services up
3.00 pm – US new home sales (July) Actual: Dropped by 41K in July
9.30am – UK GDP (Q2, 2nd estimate): no change expected to previous estimate of 0.3% QoQ and 1.7% YoY
1.30pm – US initial jobless claims (w/e 19 August): expected to rise to 239K from 232K
3.00 pm – US existing home sales (July): expected to increase to an annual rate of 5.57 million
1.30 pm – US durable goods orders (July): expected to fall by 5.5% MoM