GBP was buoyed yesterday, with the index hitting a fresh 2-month high after November's PMI numbers came in stronger than expected. The Manufacturing PMI, whilst still contracting, came in higher at 46.7 and the services number flipped back into expansion territory, coming in at 50.1. Bets on the amount of interest rate cut for next year were reduced as a result, propelling GBP higher.
EU PMI numbers were marginally better than expected, giving the EUR some support as well.
* Daily move - against G10 rates at 7:30am, 24.11.23
** Indicative rates - interbank rates at 7:30am, 24.11.23
Numbers from Germany this morning confirmed the economy contracted in the third quarter of this year, making the nation perhaps the sick note of Europe. Yesterday's PMI numbers across the bloc signalled that activity was better, but gain on the EUR as limited. We said at the start of the week that EURUSD was approaching key resistance levels, indicating we could be near the peak of the value in the EUR – this weeks performance (thus far) on the currency signals potentially the currency has run out of steam and thus we could be going into a phase where we see it weaken going forward – today's closing rate will be key in this, and we keep on eye on German IFO numbers.
For the rest of the day US PMIs will be key, and if whether the numbers follow on from the better-than-expected numbers from UK and Europe yesterday – if so then that could be a small catalyst for the USD to reverse its weakness this month.
We highlighted at the start of the week EURUSD was coming into a region of resistance, as well as technical indicators indicating the pair was overbought. This week's price action (so far) further backs the case that we could be seeing a reversal lower following a month's worth of gains… time will tell.
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