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The weaker dollar has been staging a small but confident fight-back so far this week, most evident against the dollar bloc currencies (Aussie, kiwi and Canadian dollar), with the euro and Swiss Franc managing to outperform. This morning however, the euro has come under pressure after preliminary manufacturing PMI data from France and others came in weaker than expected, sending EURUSD towards the 1.3700 level. The other main mover has been the Aussie, put under pressure during the Asia session to 0.8950 on the weaker HSBC manufacturing PMI data which fell to 48.3 (from 49.5). This also gave the yen reason to push higher, along with the 2% fall in the Nikkei.

Elsewhere the Fed minutes released last night confirmed that the Fed has all but dropped their commitment to keep policy accommodative until the unemployment rate falls to 6.5%. This follows on from the adjustment to forward guidance seen from the Bank of England last week, with their unemployment threshold also having been dropped. Central banks have been doing their best to convince markets that interest rates are not going to rise anytime soon, which has worked for the US going into the end of last year, but not so much for the UK. Ultimately it has been data that has been driving expectations and also currencies, which is why cable has had such a good run up to the start of this week. For today, US CPI is seen rising from 1.6 to 1.7%, with usual weekly claims data seen falling from 339k to 335k.

Further reading:

German and French PMIs disappoint – EUR/USD loses 1.37

FOMC Minutes sees economy on track, reflects new hawkish composition – USD marginally stronger