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FOREX: Calmer Market Friday, But Concerns Over Single Currency Remain

FOREX
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  • A much calmer market early Friday relative to the sharp sell-off suffered by both EUR/USD and GBP/USD yesterday. Post-mortems of the move see most looking to technical breaks of support (we identified 1.2367 in GBP/USD and 1.0335 in EUR/USD), sprawling growth concerns for Europe that could be worsened by Trump's inauguration and political dissatisfaction across mainland Europe and the UK.
  • EUR/USD parity again becomes a focus going forward. Options markets now priced an implied probability of 49% for the pair to touch 1.00 in the coming three months (up from 28% a week ago), and a 21% probability (up from 13% a week ago) of the pair closing below parity at end-Q1.
  • The greenback is modestly lower early Friday - however this was also the case for much of Thursday morning - leaving markets watching for any US hours recovery for the greenback. Activity elsewhere remains thin, with the Japanese market holiday keeping volumes light in overnight trade.
  • Focus for the remainder of Friday trade turns to the ISM manufacturing release for December, expected to edge slightly lower to 48.2 from 48.4. Particular attention may be paid to this release given the sharp miss for the December Chicago PMI read - and another miss in today's data could set up a string of poor releases headed into the Fed decision at the end of the month. 
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  • A much calmer market early Friday relative to the sharp sell-off suffered by both EUR/USD and GBP/USD yesterday. Post-mortems of the move see most looking to technical breaks of support (we identified 1.2367 in GBP/USD and 1.0335 in EUR/USD), sprawling growth concerns for Europe that could be worsened by Trump's inauguration and political dissatisfaction across mainland Europe and the UK.
  • EUR/USD parity again becomes a focus going forward. Options markets now priced an implied probability of 49% for the pair to touch 1.00 in the coming three months (up from 28% a week ago), and a 21% probability (up from 13% a week ago) of the pair closing below parity at end-Q1.
  • The greenback is modestly lower early Friday - however this was also the case for much of Thursday morning - leaving markets watching for any US hours recovery for the greenback. Activity elsewhere remains thin, with the Japanese market holiday keeping volumes light in overnight trade.
  • Focus for the remainder of Friday trade turns to the ISM manufacturing release for December, expected to edge slightly lower to 48.2 from 48.4. Particular attention may be paid to this release given the sharp miss for the December Chicago PMI read - and another miss in today's data could set up a string of poor releases headed into the Fed decision at the end of the month.