Forex snapshot

EUR/USD is lower after the eurozone revealed soft manufacturing figures, while the GBP/USD is broadly unchanged as we await tomorrow’s UK inflation report.

Euro and US dollar notes

Euro hit by PMI reports

The euro is trading at $1.3582. This morning France, Germany and the eurozone reported their manufacturing and services reports, which were all worse than expected. 

Weak German figures were the most surprising. Prior to the the European Central Bank's monetary easing decision, Germany was the biggest opponent to the policy; now that the German economy is beginning to slow down, it may increase the likelihood of more monetary easing in the future.

The euro dropped below the $1.36 mark after the French figures, and if it drops below $1.3560 the next target would be $1.35. This level has provided support to the euro in recent weeks.

Sterling holds on to $1.7

The pound is trading at $1.7015 and there has been little movement overnight. As I previously stated, sterling has benefited from the Federal Reserve bond-buying scheme. Janet Yellen noted that US household spending increased only slightly, indicating that monetary policy will remain loose for the foreseeable future.

The pound can’t only depend on a weak dollar. Inflation in the UK dropped to 1.5% last week and this takes pressure off Mark Carney, but at the same time he does not want to keep interest rates at record lows forever. Hawkish comments from Mr Carney could push the pound towards $1.71.

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