The euro tumbled across the board today despite upbeat data showing signs of strenghtening recovery in the Eurozone. The markets shrugged off PMI data which showed activity in June increased in both services and manufacturing in the region. The composite PMI climbed to a four-month high of 54.1 in June from 53.6 in May.
Despite the good Eurozone data, the euro fell to a 2-week low against the dollar to 1.1134. Just yesterday the euro tested the 1.14 handle. But despite optimism for an agreement to be reached between Greece and its creditors this week, Greek Prime Minister Tsipras still needs to be able to secure parliamentary support for reform ahead of further discussions with the Eurogroup scheduled for Wednesday and this is causing concerns in the markets. The Eurogroup meeting is followed by the EU leaders’ meeting on Thursday and Friday. So the Greek issue is not a done deal yet and there are still a number of obstacles in the way, thereby placing the euro under pressure after yesterday’s rally on the hopes of a deal. Meanwhile, a broadly stronger dollar today is also weighing on the euro.
The dollar defied bad US durable goods data and rose in response to Federal Reserve policymaker Jerome Powell’s hawkish comments during a Wall Street Journal interview today. Powell believes there could be two Fed rate hikes later this year, one being in September and the other in December. He did reiterate though that rate rises are still data-dependent.
The dollar briefly dipped after durable-goods orders fell 1.8% versus expectations for a 0.6% decline. Against the yen, the greenback fell to 123.70 but quickly rose on Powell’s comments to 124.17. But the dollar lost steam and wasn’t able to break above a key resistance level and despite positive data on US new home sales and the Richmond Fed manufacturing index, the dollar/yen pair eased back down to 123.81. The next risk events for this pair will be Wednesday’s Bank of Japan monetary policy meeting minutes and final US GDP Q1 data.