Brown Brothers Harriman’s (BBH) Elias Haddad reports that EUR/USD has recovered part of its recent slump but remains below 1.1400.
A stronger-than-expected Eurozone July PMI and a hawkish hold from the ECB support the Euro, though higher Oil prices keep growth risks skewed lower
Markets price around 75 bps of ECB tightening over the next year, seen limiting Euro downside rather than driving sustained gains. Stronger PMI and ECB path support Euro “EUR/USD recovered some of yesterday’s slump but is holding under 1.1400. The Eurozone July PMI was a lot stronger than anticipated.
The composite PMI increased to a five-month high at 51.9 (consensus: 50.2, prior: 50.0) reflecting both a recovery in services business activity and a faster expansion in manufacturing production.” “Nevertheless, renewed oil price gains keep the risks tilted toward weaker Eurozone growth and higher inflation. That limits EUR/USD relief rallies.” “ECB delivered a hawkish hold yesterday. As was widely expected, the ECB left the policy rate unchanged at 2.25%.