Will PMI’s Aid EUR and GBP Rallies?

European equity markets are expected to open a little higher on Monday as traders await a selection of manufacturing PMI reports from across Europe as well as some unemployment data.

US Bank Holiday Weighs on Volumes Early in the Week

Trading volumes are likely to be relatively subdued at the start of the week, as we’ve already seen evidence of in the Asian session overnight, due to Tuesday’s bank holiday in the US and the half day today that precedes it. Of course, this doesn’t mean markets will necessarily be flat and the constant stream of data throughout the day could aid this.

Central Bank Hangover

Japanese and Chinese Data Beat Expectations

We’ve already had some decent manufacturing numbers out of China and Japan overnight, with the PMIs both beating expectations and the Tankan index rising to 17 – its joint highest reading in almost a decade. The yen hasn’t been overly responsive to the data though, with the Bank of Japan remaining among the increasingly few central banks that is unlikely to tighten monetary policy any time soon, although more numbers like this may change that.

PMIs Put Focus Back on EUR and GBP

Sterling and the euro were two of last week’s standout performers as the heads of both central banks delivered quite hawkish speeches – intentional or not – that went against their previously dovish stance. While we’ve known for some weeks now that policy makers at both the Bank of England and the ECB have become increasingly open to tighter monetary policy, this shift from Mark Carney and Mario Draghi was a sign that even the more dovish policy makers may be reluctantly accepting the possibility that monetary policy will become less accommodative.

Week Ahead Dollar Weaker After Hawkish Comments From Central Banks

With sterling and the euro both consolidating around their recent highs against the dollar, traders may be looking to today’s PMI numbers to provide the catalyst for another push higher. We’ve seen a gradual improvement in sentiment in the euro area over the last year, as the economy finally begins to pick up following years of mediocre growth. The UK PMI has benefited greatly over the last year from the Brexit-related collapse in sterling, as foreign buyers look to take advantage of the much cheaper prices.

OANDA fxTrade Advanced Charting Platform

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.