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Euro falls on deteriorating European economic indicators, US PPI strengthens dollar

European PMIs were released last week and were lower than expected across the board.

Jun French manufacturing PMI 45.3 (forecast 46.8, previous 46.4)
Jun French non-manufacturing PMI 48.8 (49.9 expected, 49.3 previous)

June German Manufacturing PMI 43.4 (46.4 expected, 45.4 previous)
June German non-manufacturing PMI 53.5 (54.4 expected, 54.2 previous)

June Eurozone Manufacturing PMI 45.6 (forecast 47.9, previous 47.3)
June Eurozone Non-Manufacturing PMI 52.6 (53.4 expected, 53.2 previous)

All slightly below market expectations and previous figures. The Eurodollar fell sharply from around 1.0720 to around 1.0672.
A break below around 1.0650 would be a major support line to wait for the opportunity to break below.

The Swiss National Bank also cut its policy rate by 0.25% to 1.25%. Preliminary expectations were quite close, but many market participants may have assumed no rate cut, as there were slightly more expectations for no change in policy. After the results were announced, the Swiss franc sold off from around 0.8840 to around 0.8900.

Looking at the Swiss franc’s movements to date, there has been considerable selling of the Swiss franc since around the time of the March rate cut on the assumption that interest rates would be cut on the grounds of subdued inflation. However, at the end of May, the Central Bank Governor stated that the Swiss had sold too much Swiss and that he would intervene in the currency market to reduce inflation, which had a negative impact on inflation.
This time around, the policy has been to encourage the Swiss to sell off.

The rise in the dollar-Swiss has also boosted the dollar as a whole. The dollar has also been steady. Basically, the uptrend in the dollar-yen will continue, but we do not want to chase higher prices too high due to intervention risks.

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