It’s all a Question of Timing

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Idea of the Day

Last night’s July FOMC meeting minutes did little to provide guidance for the markets and the questions around the timing and size of Fed tapering remain. Timing remains the crucial focus for the markets and the consensus expects to see a reduction in central bank bond purchases sooner rather than later.

This concept has kept the Dollar trading with a bid tone during the Asian session. Focus on the Eurozone PMI numbers are likely to dictate the next move, weaker numbers will likely see further pressure on EURUSD.

Data/Event Risks

EUR: The preliminary PMI data will be scanned for signs of further recovery in the Eurozone, especially in the periphery where some tentative signs of life have been seen in recent data. Stronger readings (especially in Spain and Italy) could give small lift for the single currency. Update: Euro-zone PMIs exceed expectations, but EUR/USD hesitates

USD: As always, weekly claims in focus as the labour market remains the lynch-pin on which September tapering could be decided as the market is not yet totally convinced of Fed going down this path at this time.

Latest FX News

JPY:  JPY has traded modestly lower overnight with USDJPY pushing above 98 and holding its ground into the European open. The BOJ suggesting a willingness to provide additional stimulus should the economic recovery falter.

AUD: AUD remains on the ropes trading to a low of 0.8932 overnight but recovered on a better than expected China PMI Flash Estimate which came in at 50.1 (previously 47.7).

GBP: Sterling’s post FOMC move has largely been in line with the wider Dollar move and with no significant UK data today this is set to continue. Early European trading sees an attempt on the 1.5580 support level. A break here could see an attempt on the more crucial 1.5530 level.

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