Forex trends Friday: Euro and sterling steady, but PMI data and Brexit eyed

Euro coinsPhoto by Leslie Shaffer

The euro and the pound sterling were fairly steady on Friday, but Eurozone PMI and any fresh Brexit developments were on the radar.

At its meeting on Thursday, the European Central Bank (ECB) ended its quantitative easing program of buying bonds, which had worked to keep interest rates low and push liquidity into markets.

“The ECB was entirely in line with expectations. All boxes were ticked: rates left unchanged, the asset purchase program would come to an end this month and monetary policy guidance was left unchanged,” Stephen Innes, head of Asia Pacific trading at OANDA, said in a note on Wednesday.

He noted that the euro fell, but came off lows as traders look forward to the U.S. Federal Reserve’s December policy meeting, which will likely spur traders to play bearish U.S. dollar views as Fed members have recently been “lyrically dovish.”

But Innes added that euro sentiment would likely hang on Eurozone PMI data, which were due later Friday.

“The most important driver for the euro has been weak EU economic growth so any positive glean for today EU PMI will be seized upon instantly,” he said.

Societe Generale, however, pointed to continued concerns over Brexit as likely to weigh on the common currency.

“Brexit uncertainty is increasing and the threat to European growth from a global trade conflict remains high. And the euro remains vulnerable to any weakness in its other, non-U.S. trading partners’ currencies,” Kit Juckes, a strategist at Societe Generale, said in a note on Thursday.

“It seems unlikely that we will see the euro start to rise against the dollar in earnest until sterling and yuan stop falling,” Juckes said. “There have been plenty of years in my life when market sentiment turned in January, but the idea that Brexit risk and Chinese slowdown concerns will vanish as soon as the Christmas pudding has caught fire seems a bit hopeful.”

Currencies

The U.S. dollar index was at 97.09 at 7:05 A.M. SGT after spiking as high as 97.29 during Thursday’s session, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.913 percent at 8:18 A.M. SGT, in line with levels throughout Thursday’s session, after climbing from as low as 2.829 percent earlier in the week, according to Tullett Prebon data.

The euro/dollar was at 1.1360 at 8:22 A.M. SGT after trading in a 1.1330 to 1.1393 range on Thursday, according to DZHI data.

Sterling to remain pressured

The British pound/dollar was at 1.2642 at 8:23 A.M. SGT after trading in a 1.2608 to 1.2687 range on Thursday, according to DZHI data.

When it comes to sterling, Juckes was downbeat, pointing to Brexit uncertainty.

“A frenetic few days in British politics have failed to cast any light on the Brexit outlook,” he said. “A ‘no deal’ exit, a second referendum, a cosmetically-adjusted version of the current deal and an extended period before the U.K. leaves the EU, are all possible. The last choice (a delay) is the most likely,” he said.

“We have no better idea than to look for sterling to bump along the bottom of this range, unable to justify a significant rally unless a hard Brexit is ruled out,” Juckes added.

The dollar/yen was at 113.631 at 8:23 A.M. SGT after trading in a 113.17 to 113.708 range on Thursday, according to DZHI data.

The dollar/yuan ended Thursday at 6.8797 after trading in a 6.8622 to 6.8818 range during the session, according to DZHI data.

The dollar/Singapore dollar was at 1.3713 at 8:23 A.M. SGT after trading in a 1.3692 to 1.3725 range on Thursday, according to DZHI data.

The dollar/Malaysian ringgit ended Thursday at 4.1780 after trading in a 4.1760 to 4.1815 range during the session, according to DZHI data.

The dollar/Indonesian rupiah ended Thursday at 14,490 after trading in a 14,472 to 14,595 range during the session, according to DZHI data.

 

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