Forex Major Currencies Outlook (May 23, 2014)

The flash manufacturing PMI surged from 55.4 to 56.2, outpacing the consensus at 55.6. However, existing home sales and initial jobless claims both fell short of expectations. Only the new home sales report is due from the US economy today and it might show a rise from 384K to 426K.

EUR

The euro resumed its drop to its major counterparts when euro zone PMI came in mostly below expectations. In particular, data from France was much weaker than expected since both manufacturing and services PMIs slipped back below the 50.0 level and indicated industry contraction. As for Germany, the manufacturing PMI showed a slower expansion while the services PMI showed a pickup. Overall, euro zone manufacturing PMI was below consensus while services was strong at 53.5. German Ifo business climate data is due today and a dip from 111.2 to 111.0 is eyed.

GBP

The pound gave back some of its recent gains when the public sector net borrowing report printed a higher government deficit. The report showed that borrowing was at 9.6 billion GBP versus the estimated 3.6 billion GBP figure while the previous month’s report received a downgrade. This revived fears of debt troubles in the UK and was enough for traders to ignore the UK revised GDP reading of 0.8%, which showed upgrades in consumer spending and business investment. There are no reports due from the UK today.

CHF

The franc continued to flash signs of weakness as there were no reports from Switzerland to give it a boost. There are still no reports due today so it should be all about franc weakness or consolidation until the end of the week.

JPY

The yen had a mixed day, as it lost ground to the pound but consolidated against most of its major counterparts. There were no reports released from Japan then and none are due today, which suggests that more currency-specific moves might be seen.

Commodity Currencies (AUD, NZD, CAD)

The comdolls had a slower day yesterday as traders were undecided on how to play the recent changes in risk sentiment. An improvement in China’s HSBC manufacturing PMI brought gains earlier in the trading day but these soon fizzled out in the later trading sessions. Canadian retail sales came in weaker than expected, as the headline figure showed a 0.1% decline while the core figure printed a mere 0.1% uptick. Canada’s CPI reports are due today.

By Kate Curtis from Trader's Way