Euro zone PMI and FED speakers in focus
Markets finished on a positive note on Friday on back of strong US Existing Home Sales, giving a boost to US equities with Nasdaq taking home 1.2% and the S&P500 0.6% with healthcare and financials leading the pack. Overnight, Asian indices opened in positive, but despite overall supportive Japanese figures, the markets have been focusing on the Manufacturing PMI, which showed worse than expected contraction in the sector, sending risk lower with the Nikkei still being stuck in the range from the Ichimoku cloud resistance on daily and the 61.8% Fibo retracement in recent wave, where we could see stops building above 16,836.
In FX markets, the US Dollar index strengthened a tad on Friday, but has been soft in the Asian trading session and most pairs have appreciated against the greenback. GBP is under renewed pressure on back of Brexit concerns and the debate on Thursday on BBC will without a doubt also have an impact in the markets.
This morning, German PMI figures came out stronger than expected which has supported the EUR this morning, with EURUSD being supported by the 38.2% Fibo retracement in the wave from Dec 2015-2016 high and the 100-day SMA coming in just below. Euro zone PMI will be out shortly, where consensus in the market is for a slight gain in the preliminary May Composite PMI expected at 53.2 from 53.0 in April. This is based on an overall improvement in confidence and manufacturing, which should provide better grounds for stabilisation in the Euro zone (leaving out the possibility of a Brexit). Like the FTSE, EURUSD is currently stuck between the 50- and 100-day SMAs.
Besides from the US preliminary May manufacturing PMI (exp at 51.0 vs. 50.8 in April), Fed speakers will possibly bring some noise to the markets. St. Louis Fed President Bullard should be given the most attention, since he is a member of the FOMC’s voting committee and is to speak in Beijing at 1215CET on monetary and economics. We expect him to keep the hawkish tone, which could trigger renewed interest in USD longs. Fed Presidents Williams and Harker will hit the wires at 14CET and 0030CET and both are also belonging the hawkish choir. Since markets are anticipating these speakers to be supporting a stronger US Dollar, we see the risk being to the downside, as the information should be priced in.
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