The US dollar attempted to rally yesterday despite treasury yields falling a tad, the dollar index posted a modest gain helping to push the single currency lower. EURUSD has been content in its recent 1.0850 to 1.0930 range, and traders briefly tested the downside yesterday ahead of today’s PMI report and tomorrow’s ECB meeting. The pair broke through support to trade as low as 1.0820, triggering some buying interest to push the pair back within its recent range. Markets will be paying close attention to this morning’s composite PMI data, looking for clues on the outlook for the euro area economy. January’s preliminary reading is expected to tick higher to come in at 48.0 against the previous 47.6.
The lack of UK data has kept the pound on the sidelines with GBPUSD continuing to consolidate, however the pair briefly followed EURUSD lower yesterday afternoon. Buying on dips remains a trade of choice, with cable finding support yesterday at 1.2660 pushing the pair back to the pivotal 1.27 area this morning. There appears to be some positive momentum building around the pound, with less bearishness and possibly even a small hint of optimism. UK PMIs are on the docket this morning, expected to remain in expansionary territory at 52.5 in January, a modest improvement on the previous reading of 52.1.
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