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Central Bank Pricing Backtracks, Denting EUR

FOREX
  • The single currency is among the poorest performers in G10 so far Friday, following ECB market-implied pricing lower after a set of disappointing PMI releases from France and Germany.
  • Prelim PMIs from both territories showed a distinct weakness in manufacturing relative to services, with both exhibiting a further pullback in price pressures as rate hikes begin to bite. The data knocked close to 10bps off peak ECB pricing, tiliting the implied peak rate back below 4.00% in deposit rate terms.
  • Price action in EUR/USD extended the pullback from yesterday's high of 1.1012. The pullback is considered corrective - for now. Attention turns to support at 1.0853, the 20-day EMA. A clear break of this average would signal scope for a deeper pullback and this would open 1.0804, the Jun 15 low and 1.0733, the Jun 12 low.
  • GBP trades more mixed - a softer PMI release initially dented the currency, but weakness was contained by evidence in the survey showing persistent strength in services prices - a key point of focus for the Bank of England. A firm set of May retail sales also got the currency off to a good start.
  • US prelim PMIs take focus going forward, with markets expecting further weakness in manufacturing, and stubborn strength for services. CB speakers include Fed's Bullard & Mester as well as ECB's Vujcic, de Cos and Panetta.
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