EUR lower after PMIs, GBP fails to gain on Brexit agreement; Draghi appears

Market Recap
It’s hard to pin today as a “risk on” or “risk off” day. Stocks were lower yesterday but are mixed today, with Tokyo stocks higher. That would accord with the fact that USD/JPY and USD/CHF are both significantly higher this morning, indicating “risk on.” Yet the trade-weighted index (TWI) for JPY and CHF indicate “risk off,” as does the higher USD and weaker EUR nowadays.
The weakness in EUR mostly happened on Friday after the German manufacturing purchasing managers’ index (PMI) fell to the lowest in almost three years. Overall, both manufacturing and services fell across the board. They also fell in the US, but not by as much, and both US PMIs are now higher than their EU counterparts. This matters, because the ECB is in the process of deciding whether to end its QE program and how soon to normalize rates, whereas the US is already embarked on its tightening program. The EU can more easily delay its normalization process than the US can disrupt its “gradual pace” of rate hikes.

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