EUR retracing

Daily Update

Yesterday’s Market

• Results from Austrian Election and Italian Referendum
• EUR Markit Services PMI
• USD ISM Non-manufacturing PMI
• USD Speeches by Fed's William, Evans & Bullard

Yesterday Explained

Many investors may be wondering why EUR/AED increased to 3.95 during the US session ,after the Italians voted against Prime Minister Renzi's Senate reforms especially after EUR/AED dropped to 3.87 early morning after the referendum results.

As per market experts main reasons why EUR/AED picked up;

1. Markets was expecting Italian Prime minister to lose the referendum
2. German - U.S. yield spread growths - German - U.S. yield spread moved sharply higher yesterday in return driving EUR/AED up with it
3. Aggressive EUR/USD Short Covering – Investors started buying more EUR during the US session hoping that ECB will announce a fresh round of stimulus on Thursday
4. Markets have also welcomed the news of new Austrian president who defeated the Anti-European union candidate – which will favor the European union

However as per market experts the increase in EUR/AED pair is just a temporary at the moment and we will have a better idea on where the pair is heading after the ECB meeting on Thursday.

As per economic data front, EUR zone and USA Market services PMI data came negative but didn’t have a bigger effect on the market. USA ISM Non-manufacturing came out positive which helped USD to remain it’s strong position against its rival currencies expect for EUR. Investors will want to know whether the ECB will extend its QE program beyond the intended end date of March 2017, and how aggressive or otherwise the Fed will be in tightening US monetary policy. The Fed speeches in the evening did not give much direction on US economy so markets didn’t see much movement in the currencies.

Today’s Markets

• AUD RBA Interest rate decision and Rate statement
• EUR Gross Domestic Product
• USD Factory orders

Today’s Focus

At the RBA meeting early morning UAE time, it was decided to keep the interest rate unchanged at 1.5%. This was despite some mixed data on the country’s fixed investment and construction sector released recently.  The chances of a rate cut next year are seen receding as well, as the economy appears to be doing a little better-than-expected overall.

By midafternoon Euro zone will release its Gross Domestic Product report. This is a measure of the total value of all goods and services produced by the Eurozone. The GDP is considered as a broad measure of the Eurozone economic activity and health. The day will end with Factory order report from USA. This report is a measure of the total orders of durable and non-durable goods such as shipments (sales), inventories and orders at the manufacturing level which can offer insight into inflation and growth in the manufacturing sector.