The single currency is still trading under 1.36 versus the greenback undermined by the release of June EU manufacturing PMI Flash reading which came down to 51.9 while the consensus was referring to 52.2 from 53.4 in May and also by the falling of June EU Services PMI Flash reading which retreated to 52.8 while the market was waiting for rising to 53.3 from 53.2 in May driving June Flash EU Composite PMI down to 52.8 too while the median forecast was 53.5 as the same as May.

These data came also after unexpected drop of June Flash EU Consuming confidence index which has been released by the last week end to show falling to -7.4, while the consensus was referring to -6.5 from -7.1 in May to weigh down on EURUSD to plunge to 1.3564 before ending last week just below 1.36

The weekend has shown also another signal from the ECB Mario draghi that the ECB has not finished yet and it is to impose a QE plan can have what’s more than sovereign bonds buying, in the case of facing further retreating of the inflation and more need for stimulating the EU economic growth.

The ECB has decided this month tolower the deposit rate by -0.1% from zero has been introduced since July 2012 lowering the refinancing interest rate by 0.1% to 0.15% and in an unconventional way, it has decided to introduce 2 LTRO rounds next September and next December valued €400b and in what could be a step to the QE, the ECB managed to prepare for outright purchases of asset backed securities and also ended the sterilization of the SMP extending the fixed rate full allotment till the end of 2016.

The single currency has suffered after these decided measurements especially as Draghi has indicated during the press conference following the ECB meeting that the ECB has not finished yet and it can do what’s more weighing down on the bonds yields in the European secondary money market.

Last week, The Fed has sent a message to the market that it is not to start directly raising the interest rate following the end of the QE which will be lowered by the same measured way and also it has highlighted that there is no plans yet to cut its balance sheet even after the beginning of raining the interest rate which can be started with the hiking the deposit rate.

This message has put pressure on the greenback and drove US blue chips up with longer than expected stimulating period of time to be represented by the Fed.

EURGBP came under pressure and the cable could maintain a place over 1.70 getting use of these current monetary stances of the Fed and the ECB which could make the British pound outpace the EUR and USD especially, as the MPC meeting minutes of June have shown tendency to hiking the interest rate as long as there is accord among the members that the pace of tightening will be gradual while the labor market conditions are improving and the mortgage debt is growing with the houses prices building up.    

The gold could be supported by the message which put pressure on the US treasuries yields to make the gold much more attractive as a safe haven to be traded currently above $1300 per ounce supported from another side by the growing political concerns in Iraq which fueled the energy prices which are also underpinned by low funding costs for longer period in US and also from another side by Russian Gasprom decision to trim sending Gas to Ukraine.

Kind Regards

FX Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

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