Forex Analysis: Euro Looks to EU Budget Talks, PMI Data for Direction

The Euro may be in for an active session as traders size up November’s set of flash PMI figures while EU leaders gather to hash out the region’s seven-year budget.

Talking Points

Euro May See Selling Pressure if PMI Data Boosts ECB Rate Cut Bets
EU Budget Deal May Prove Harder to Achieve Amid Euro Debt Crisis

The preliminary set of November’s Eurozone PMI figures headlines the economic calendar in European hours. Expectations suggest the region-wide composite gauge will remain unchanged 45.7, showing manufacturing- and service-sector activity contracted at the fastest pace since June 2009 for a second consecutive month.

A print in line with expectations is unlikely to yield a strong reaction from the Euro in and of itself. Indeed, traders have had ample opportunity to price in the depth of the Eurozone recession as it stands at the moment. A disappointing outcome may weigh on the single currency however as compounding malaise boosts expectations of additional ECB easing.

Meanwhile, EU leaders will meet to hammer out the region’s seven-year budget. Familiar issues have resurfaced, with France arguing against proposed cuts to its cherished Common Agricultural Policy (CAP) that heavily subsidizes the country’s farmers while the UK threatens a veto if spending is not reduced to mirror austerity at the member-state level.

While this is a familiar battle that has emerged time and again in EU budget negotiations only to end in compromise, the backdrop of the Eurozone debt crisis may make for a more heated outing this time. EU coffers are a major source of cash for those “PIIGS” countries already running bailout programs.

A final deal is not due until tomorrow but traders will keep a close eye on sideline commentary to gauge the tone of the proceedings. Signs of deadlock may spark risk aversion, boosting the safe-haven US Dollar.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

21:45

NZD

Net Migration s.a. (NOV 16)

260

–

140 (R+)

1:45

CNY

HSBC Flash Manufacturing PMI (NOV)

50.4

–

49.5

5:00

JPY

Supermarket Sales (YoY) (OCT)

-4.0%

–

-2.0%

7:30

JPY

Bank of Japan Releases Monthly Report

–

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

IMPACT

–

EUR

EU Leaders Hold Summit on Seven-Year Budget

–

High