Ned Rumpeltin, European Head of Currency Strategy at TD Securities, suggests
that the key focus will be on the US ISM manufacturing PMI and he expect a drop
to 49.4 this month, well below the consensus forecast of 50.0.
Key Quotes
“This would be the first slip into
contractionary territory in three years for this sector of the US economy,
reflecting a slowdown in global activity, weak capex in the oil-related sectors,
and the impact of ongoing USD strength.”
“From a currency perspective,
the USD is likely to face broad headwinds if our forecast is realized, as the
optics of a sub-50 print do not sit well against the Fed’s affirmations that a
rate hike remains on the table for this year.”
“In addition to expected
further underperformance against the GBP, we will be keeping an eye on both the
EUR and JPY. For the EUR, we think a large segment of the shorter-term market
has sold the common currency heavily since the 22 October ECB meeting. These
positions may start to look increasingly vulnerable against a resilient Eurozone
economy. For EURUSD, we think the 1.1096 level is a key near-term threshold
while 1.1140 would add to upside risks for the common currency.”
