EUR moves lower ahead of President Lagarde


Eurozone final manufacturing PMI revised up to 46.9 from the 46.6 reported initially. This still leaves the headline number firmly in contraction territory, but the uptick from 45.9 in October raises the hope that the manufacturing sector is starting to bottom out. Markit reported milder falls in new orders and output, but still highlighted sustained job losses, despite the slight improvement in confidence. The German reading in particular remains low at just 44.1, even if this is already a 5-month high. Looking ahead, there will need to be a resolution of global trade tensions and a US-China trade deal as well as a smooth Brexit transition for the manufacturing sector to recover significantly.

Across the English Channel, the final UK manufacturing PMI for November was also revised higher, to 48.9 from the 48.3 in the preliminary reading. The headline still declined from October’s 49.6. The breakdown confirmed that output, new orders and employment in the sector all declined, and the survey showed de-stocking to have been afoot as firms depleted buffers built up before the October-31 Brexit date was delayed. Political (General Election next week) and Brexit uncertainty (January 31 … or not?) remain a drag on activity, as, above all else, markets hate uncertainty.

The news saw an initially stronger EURGBP, as it rallied to 0.8540 from early European session lows at 0.8523. Versus other peers, both Sterling and the EUR are biased lower so far today. The Crossing EMA Strategy (H1) saw EURUSD, EURCHF and EURCAD all trigger lower at 09:00 GMT, following similar moves earlier from EURAUD (04:00) and EURNZD (01:00). EURJPY also moved lower at 12:00.

Ms Lagarde is due to testify before the European Parliament in Brussels (from 14:00) and before the US ISM Manufacturing PMIs (15:00), where she is expected to outline the economic outlook for the Eurozone and keep to the ECB script. That is, that the ECB won’t be adding to the stimulus measures already in place and that more fiscal measures and structural reforms are required, something her predecessor, Mr Draghi, was often heard championing.

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Stuart Cowell

Head Market Analyst

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