Currency Markets Look to GDP, PMI Job Numbers
Thursday will see an active data flow from the global financial markets, with headline GDP and PMI numbers set to rile up currency traders.
The action begins at 05:45 GMT with the release of Switzerland’s first quarter GDP report. The Swiss economy is projected to grow 0.4% in the first quarter, following a 0.1% increase the month before.
Like the European Central Bank (ECB), the Swiss National Bank (SNB) has embarked on a path of negative interest rates to shore up the domestic economy.
GDP data quickly makes way to manufacturing PMI. IHS Markit will release the latest batches of manufacturing reports for Germany, France, Italy and the broader Eurozone between 07:30 GMT and 08:00 GMT. A half hour later, Markit will release its UK manufacturing report.
PMI data are expected to show steady growth for the British and euro area economies. This could make for an active trading session in the European currency markets. Traders should therefore keep an eye on the euro, pound and Swiss franc in the coming hours.
Broad dollar weakness has pushed the USD/CHF to its lowest level since October. The pair has declined more than 700 pips this year, reflective of the greenback’s performance against a basket of world currencies. The dollar has broken down several support levels against the franc in recent months, pointing to a prolonged bearish market. The bearish bias is likely to continue should US jobs data disappoint in the coming days. Traders should therefore circle the upcoming ADP jobs report on their calendar. The report, which is released at 12:15 GMT, is expected to show the creation of 185,000 private sector jobs last month, up from 177,000 in April.
The euro overcame the odds Wednesday to reach fresh yearly highs against the greenback. The EUR/USD exchange rate has reaffirmed its bullish stance, and was seen trading as high as 1.1260 through the overnight session. It has since given back the majority of those gains, but continues to trade in the vicinity of 1.1240. Traders looking for the next leg higher should carefully monitor the upcoming PMI reports, which could provide insights into the health of the euro area economy.
The British pound staged a recovery on Wednesday despite political concern over the upcoming parliamentary election. Cable reached a session high of 1.2890 overnight, and was last seen trading near 1.2870. The outlook on GBP/USD varies across several time horizons. It is considered bullish in the short-term, bearish in the intermediate-term and mixed over the long haul. The first psychological barrier that needs to be crossed is the 8 June election. Latest polls show Prime Minister Theresa May’s majority is thinning.