EUR/USD rises during a calm trading session

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4 July 2018


Yesterday, EUR/USD managed to reverse and regain some of its recent losses. The upward movement in the pair was perhaps related to investors closing long Dollar positions before Independence Day.

esterday’s data from the Euro Area was mixed – PPI inflation jumped in May to 3% YoY from downwardly revised 1.9%, a month earlier. Retail sales, however, disappointed slightly, remaining flat in May and falling by a downwardly revised 0.1% MoM, a month earlier. US durable goods orders numbers in May were slightly better than expected, nonetheless, they failed to support the USD.

One of the best-performing currencies on Tuesday was the Swedish Krona. EUR/SEK fell by more than 1% on the back of a more optimistic bias by the country’s central bank in yesterday’s meeting.

Yuan finds ground after the recent sell-off

The Chinese Yuan stabilised after a string of losses and ended the day advancing slightly against the Dollar. As USD/CNY crossed the psychological 6.70 level earlier in the day, PBoC announced that it is closely watching the developments in the financial markets and that it would seek to keep Yuan at a stable level. According to Reuters report, some major state-owned banks were conducting operations in the foreign exchange interbank market that helped support the currency.

Some other EM currencies also rebounded, however, the extent of support from the Dollar’s weakness was limited and the moves were quite idiosyncratic.

Sterling rebounds helped by a pause in the Dollar’s appreciation

The British currency, just about managed to rebound on the back of the slightly weaker Dollar and ended the day roughly where it was at the beginning of the week. Construction PMI showed an unexpected uptick, rising from 52.5 in May to 53.1 in June, its highest level in 7 months. Today investors arguably await one of the most important releases from the UK – PMI Services Index. The activity in the sector is supposed to remain solid. Given the significance of the indicator, any potential surprise could have an influence on the exchange rate. It might be worth watching today’s midday speech by the BoE’s, Victoria Saporta.

Apart from the UK data, PMI revisions for the Euro Area will be released today. They should not be as important unless they clearly differ from earlier results, which usually isn’t the case. It’s worth having in mind that today’s trading in the second half of the day will be limited due to the Independence Day in the US.