Forex snapshot

The euro was dented by the weak manufacturing and service reports, which added insult to injury after last night's Federal Reserve minutes. The pound has taken another knock versus the US dollar after the UK revealed softer-than-expected retail sales.

Euro and US dollar notes
Source: Bloomberg

Euro hit by PMI reports

EUR/USD is trading at $1.3265 and is broadly unchanged on the day. The single currency was in the process of pulling back its losses when the eurozone revealed a decline in manufacturing and services.

The currency pair is under pressure from both angles; last night a number of Fed members voiced their concerns about inflation levels which lead to a rally in the US dollar, and this morning we were given further proof that the eurozone economy is slipping.

The Russian sanctions have not yet trickled down into the economy, but the longer the standoff continues increases the likelihood of manufacturing and services slipping.

The US will announce the jobless claims figures at 1.30pm (London time), and analysts are expecting a reading of 303,000. A dip below the 300,000 mark could drive the euro towards $1.32, while a soft report might see the euro pull back to $1.3335.

Spot FX EUR/USD chart

Retail sales weigh on pound

GBP/USD is trading at $1.6581; sterling slipped following the announcement that UK retail sales increased by a meagre 0.1% in July, while economists expected an increase of 0.4%. Even though two members of the Bank of England voted in favour of increasing interest rates, the economic data from the UK would suggest it is still too soon to do so.

The outlook for the pound remains negative and the only hope for a turnaround would be soft US jobless claims data, which could move the pound to $1.6663. The next level down to watch is $1.65

Spot FX GBP/USD chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts