In US trade, the euro reversed some of its stellar gains of the previous session as the initial euphoria over a series of initiatives designed to bring stability to the European banking system began to wane.
Once again, the structural realities (read, difficulties) of the eurozone reared their ugly head when the Finnish government announced that Finland and the Netherlands will block ESM bond buying in the secondary markets.
This should serve as a timely reminder to global financial markets that anything agreed by EU leaders still needs to be ratified by each nation’s respective governments – no easy task in this environment where 'one size does not fit all'. Also not helping the euro’s cause was another set of lacklustre European economic data. June manufacturing PMIs for Germany, France and Italy did not serve up any nasty surprises, but they all remained stuck below the 50 threshold at 45.0, 45.2 and 44.6 respectively.
The corresponding PMIs in the UK and Switzerland beat expectations, however the broadly weak data now has the market’s focus squarely on the upcoming ECB meeting, where there are growing expectations that a rate cut of as much as 50 basis points is on the cards. Having ended yesterday’s Australian session around the 1.2625 level, the euro drifted to close US trade at 1.2576. Upon resuming for Asian trade, the euro has edged up marginally into the mid-1.2580 range.