Not that it is normally a big driver of the euro exchange rate, but the outcome of the Romanian presidential election will be welcome news in Brussels as it prevents a further splintering of the bloc, ING’s FX analyst Chris Turner notes.
Sterling faces downside risk from the April services CPI figure
“Developments in Poland will be more worrying, however – see below. In terms of the eurozone data calendar this week, the big focus will be on Thursday’s flash PMI releases for May. So far, European business sentiment has been holding up relatively well. Should it continue to do so, the euro should stay supported as the liquid alternative to the dollar.”
“1.1265 is the intra-day resistance EUR/USD needs to break to open the topside once again. In the UK, there is much focus on the UK-EU summit. It seems here that expectations – especially in the press – have got far ahead of themselves. Initially, the summit was largely focused on defence. Now, any failure to agree on deals on food checks at the border or youth mobility will be seen as a big disappointment. That said, we do see the overall closer UK-EU alignment as a sterling positive, with any surprise progress sending EUR/GBP sub 0.8400 and GBP/USD to 1.3360/3400.”
“Tomorrow, however, sterling faces some downside risk from the April services CPI figure. Here, a downside surprise could firm up expectations for two 25bp Bank of England cuts this year. The market is currently pricing 44bp in total.”
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