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.

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

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