Euro, Pound May Rise as PMIs Set Stage for ECB and BOE Results

The Euro and the British Pound may rise as the May roundup of PMI figures sets the stage for ECB and BOE monetary policy announcements due later in the week.

Talking Points

Euro and Pound May Rise as PMIs Weighs Against Dovish ECB, BOE Bets
Aussie Dollar Gains on Official Chinese PMI Print, Ignores Soft HSBC Data

The final set of May’s Eurozone Manufacturing PMI figures headlines the economic calendar in European trading hours. Traders will look to the outcomes to set the stage for the European Central Bank monetary policy announcement later in the week. Against this backdrop, supportive results are likely to downgrade bets on further easing in the near term and boost the Euro. Needless to say, a disappointing roundup is likely to yield the opposite results.

Similarly, the UK Manufacturing PMI print will guide Bank of England policy expectations. The index is seen moving back above the 50 boom-bust threshold, making for the first expansion in sector activity in four months. Such a result is likely to be supportive for the British Pound, particularly after former BOE policymaker Adam Posen – one of the most ardent doves on the bank’s MPC committee in recent years – said incoming Governor Mark Carney ought to focus on regulatory matters rather than stimulus when he takes the reins next month.

The Australian Dollar outperformed in overnight trade, adding as much as 0.6 percent against its leading counterparts, in the wake of a supportive Chinese Manufacturing PMI figures released over the weekend. The report showed factory-sector activity expanded at the fastest pace in two months. Consensus forecasts pointed to a flat result ahead of the release.

Disappointing results on an analogous report from HSBC failed to meaningfully stem upward momentum. A greater sensitivity to supportive outcomes probably reflects the skew in the markets’ Australian Dollar positioning. Indeed, figures from the CFTC released last week showed speculators are the most net short the Aussie in over a year, creating a bias toward profit-taking on counter-trend news.

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