The euro's strong performances this morning’s against the dollar was part position adjustment into the month end fixing and part a response to the unexpectedly poor US purchasing managers’ indices from Chicago and Milwaukee. The US statistics make it more likely that the Fed reinforce its commitment to quantitative support of the US economy. Indications that the central bank is nearing the end of its purchase program will probably not be forthcoming in the FOMC statement tomorrow.
Though the ECB is widely expected to cut its base rate by 25 basis points after its Thursday meeting, the move has been long predicted as the Eurozone economies have continued to deteriorate.
The euro move began just after the release of the two mid-West statistics. Manufacturing in both regions had been predicted to expand with PMI's slightly above the 50 division between expansion and contraction. In the event both were just under 50. The stronger US economy had been expected to keep far ahead of the shrinking and austerity ridden Eurozone. Today's PMI numbers have undermined that forecast.
Chief Market Strategist