• Euro[1] may fall as soft PMI data bolsters dovish ECB outlook shift
  • US PMI data unlikely to have lasting impact absent wild surprise
  • British Pound[2] retracing losses after last week’s dramatic selloff

Eurozone PMI data headlines the economic calendar in European trading hours. The composite gauge is expected to show that the pace of manufacturing- and service-sector activity growth slowed for a third consecutive month in April, registering at the weakest in since January 2017. That may reinforce a recent dovish shift in the markets’ priced-in ECB policy expectations, weighing on the Euro.

Later in the day, US PMI statistics will enter the spotlight. A mixed result is expected, with manufacturing sector growth seen slowing while services pick up a bit of steam. On balance, anything shy of a dramatic disappointment seems unlikely to substantively derail the recent build in Fed rate hike speculation[3], especially while traders await the weightier first-quarter GDP print due Friday to make firm US Dollar[4] bets.

The British Pound corrected higher as the trading week began. The move seems corrective after last week’s bloodletting. Sterling hit the lowest level in a month against an average of its top counterparts after inflation data underwhelmed[5] and comments from BOE Governor Mark Carney cooled rate hike speculation[6]. The priced-in likelihood of a May increase is now 42.8 percent, down from 96.2 percent one week ago.

See our quarterly FX market forecast[7]s to learn what will drive prices through mid-year!

Asia Pacific

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