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EUR Underperforms Amid Weak PMIs, China Politburo Stokes Broader Optimism

FOREX
  • The single currency underperforms all others in G10 on Monday following a softer-than-expected set of flash PMI figures. Manufacturing was a particular weakpoint, with Germany's figures the standout. Germany's July flash manufacturing PMI fell to 38.8 vs. Exp. 41.0 (Prev. 40.6) – pulling down ECB terminal hike pricing and prompting broad Euro weakness
  • EURUSD slipped to a low of 1.1066 in Europe, the lowest level since Jul12, narrowing the gap with key support at 1.1055, the 50% retracement for the early July upleg. Price spent the majority of the US session consolidating around the 1.1075 mark.
  • More notable was the weakness for Euro crosses, with the likes of EURNZD and EURCAD dropping as much as 1% on the session. These moves have been spurred on by details emerging from the heavily anticipated China Politburo meeting, from which an optimistic tone has resulted.
  • The Politburo noted that it will enact a plan to resolve local government debt risks alongside strengthening counter-cyclical adjustments, as well as increasing support for the property market and actively boost domestic demand.
  • GBP was the other laggard on the session with some similarly disappointing data to its European counterparts. Cable printed as low as 1.2798 before moderately improving ahead of the APAC crossover. A lower close today would be the seventh consecutive lower close for the pair - a losing streak last equalled in August last year. Attention will be on the 50-day EMA which intersects at 1.2714.
  • German IFO data marks the highlight of the European docket on Tuesday before consumer confidence and Richmond manufacturing data in the US. All eyes will then be on Australian CPI Wednesday and the FOMC July decision & press conference.
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