Forex snapshot

The euro remains under pressure as soft economic data from the region does not bode well for the European Central Bank meeting on Thursday, while the pound has been hit by weaker-than-expected manufacturing figures from the UK.

Euro and US dollar notes
Source: Bloomberg

Euro remains under $1.32

EUR/USD is trading at $1.3138; the single currency will be in focus this week as the ECB will make an interest rate decision on Thursday, and Mario Draghi has recently suggested that more easing would be required.

This morning Germany confirmed its second-quarter GDP declined by 0.2%, and the latest manufacturing figures from the eurozone show the sector is barley growing. Additional easing from the ECB on Thursday is not a forgone conclusion, but a growing number of analysts are expecting a cut of 0.1% to 0.05%.

If extra easing is announced the euro could target $1.30 by the end of the week. On the other hand, if the ECB keeps its policy unchanged the euro could head towards $1.3289.


Pound hit by manufacturing figures

GBP/USD is trading at $1.6620 after British manufacturing in August dropped to its lowest level since June 2013. The sector is still in expansion territory but this makes a Bank of England interest rate increase before the Federal Reserve less likely.

Despite the soft figures it is positive sign that the pound is back above the $1.66 mark. The BoE is unlikely to change its monetary policy on Thursday and I expect Mark Carney’s comments will be a touch on the dovish side.

The pound has bounced off $1.6580 on number of occasions, and any clue as to when interest rates will be increased in early 2015 could push the could the pound to $1.6715.

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