Eurozone economic data should get currency trading flowing following a somewhat quiet session, with investors expecting the PMI surveys to increase pressure on the European Central Bank to activate new monetary stimulus at its meeting next week. The euro fell, tracking a broad move into safer currencies like the US dollar and the yen after manufacturing data from China missed expectations, suggesting the world’s second biggest economy is losing steam. The US dollar’s move higher reflects risk averse sentiment, and comes despite below-par US housing data. Concerns about China have put further downward pressure on commodity-linked currencies such as the Australian, New Zealand and Canadian dollars, which has helped the yen pull back from recent record lows. Most notably, the yen stepped away from an important psychological level against the US dollar despite anxiety amongst traders about the Bank of Japan policy decision. The pound moved higher ahead of the UK economic data that may show Britain’s manufacturers in a better light and increase hopes about the UK economy before Thursday’s vital first quarter GDP figures.
Sterling
The pound rose by as much as 0.6 per cent against a basket of currencies ahead of data that economists predict will reveal optimism and business activity in Britain’s manufacturing industry improved in April, supporting hopes the UK economy will start to grow over the coming quarters.
US dollar
The US dollar has made a positive start following a fairly quiet session, attracting demand from investors perhaps feeling a little uneasy about weaker-than-expected Chinese manufacturing data. Global growth concerns flared last week after China reported first quarter GDP figures which missed market estimates, pushing the safe haven US currency to two-week highs overall coming into this week.
Euro
The euro slipped on political and fiscal concerns and the single currency is likely to stumble again with economic data expected to show services and manufacturing industries across the eurozone spending yet another month in contraction territory, possibly increasing dovish European Central Bank policy bets. The euro was held down by comments from European Commission President, José Manuel Barroso, who suggested that Europe’s tough stance on fixing budget deficits is losing political and social support, particularly across the southern and peripheral member states. Barroso underlined market concerns that, with Italy still without a government, the region is struggling to keep a handle on its debt problems, while data may add pressure on the ECB to change tactics.