Another drop in the eurozone manufacturing PMI yesterday and the composite index dropping into contractionary territory, FX strategist Chris Turner notes.

Best news for EUR/USD coming with US price data

“Yesterday's swathe of PMI data took its toll on the rates markets (two-year EUR swap rates off 7bp) and the Euro.”

“Were it not for the global inflationary environment EUR/USD would look more vulnerable under 1.1100. For the time being, however, we slightly favour this 1.1100-1.1150 range to hold, with the best news for EUR/USD potentially coming with US price data on Friday.”

“As above, we continue to see the possibility of EUR/AUD trading lower and expect that the trend could extend to 1.60. Helping the move is the consistently hawkish Reserve Bank of Australia. The RBA remains definitely on inflation-watch and looks unlikely to cut rates this year.”