The euro drifted lower again on Wednesday, clinging to a fragile tone near the 1.1400 handle against the US dollar, as a fresh batch of soft inflation figures from the Eurozone and Germany chipped away at the case for more aggressive interest rate moves by the European Central Bank.
Euro loses its footing near 1.1400
The common currency struggled to find buyers throughout European trading, and the latest price data only deepened its troubles. With headline inflation across the bloc, and in Germany in particular, coming in cooler than many had braced for, investors have quietly walked back their expectations that the European Central Bank will need to keep policy tightly squeezed. Softer price pressures give the central bank room to hold back, and that shift in thinking has taken the shine off the euro. For now, the market's attention swings to the US Manufacturing PMI, due later in the day, which could hand traders their next real cue.
Pound retreats from a two-week high
The British pound ran into fresh selling during the Asian hours on Wednesday, slipping away from the nearly two-week peak around the 1.3275 zone it had reached the previous day. GBP/USD was last changing hands near the 1.3235 area, down about 0.20% on the day, as the pair shed some of its recent momentum. Sterling traders are now largely sitting on their hands, waiting on scheduled remarks from Bank of England Governor Andrew Bailey and Federal Reserve Chair Kevin Warsh for a clearer sense of direction.
Gold stays soft below $4,000
Gold, meanwhile, could not shake off the selling either. The metal stayed under pressure below the $4,000 mark and slid for a third straight day on Wednesday. Lingering uncertainty around Iran, combined with growing bets that the Federal Reserve could still raise rates, has kept the US dollar firm, and a stronger dollar tends to make bullion less appealing. Here too, market participants are looking ahead to the speech from Fed Chair Warsh and the day's US data releases for a fresh spark.
All eyes on the ISM manufacturing print
A big part of Wednesday's focus falls on the June reading of the ISM Manufacturing Purchasing Managers Index. It is one of the most closely tracked gauges of activity in America's factory sector and doubles as a useful health check on the broader economy. The consensus is for the headline number to hold steady at 54, so any meaningful surprise in either direction could jolt the dollar and, by extension, the currency pairs and gold moving around it.
Central bankers gather in Sintra
Beyond the data, there is a bigger stage in play this week. The picturesque, almost storybook setting of Sintra is once again hosting the European Central Bank's annual forum, the yearly gathering that brings together the biggest names in global central banking. The new chief at the Federal Reserve, who has openly argued that the central bank should ease off on explaining its every move, is expected to speak, and markets will be hanging on his words. In a week thin on other catalysts, that mix of policy voices could well set the tone for currencies and commodities alike.
