Eurozone PMI very numbers mixed, with the manufacturing reading coming in much stronger than expected at 52.6, up from 51.5 in the previous month, and the services reading falling back more than anticipated to 52.4 from 53.3, which left the composite at 52.8 in June, down from 53.1 in May. German manufacturing in particular bounced back, but French readings are once again in contraction territory and the data highlights that the Eurozone recovery is not evenly spread and remains subject to downside risks. As Draghi highlighted, structural reforms are needed and ever more monetary accommodation won’t fix the Eurozone’s underlying problems. Bund futures already moved higher going into the overall release, after the weaker than expected French numbers earlier on and the key question also for the Eurozone outlook will be how the U.K. votes in today’s referendum on EU membership.
EURUSD continues to track Cable in a thin-market, Brexit-related correlation. Today’s vote in the UK, needless to say, presents the euro with significant polarized risk. Overnight sterling vols best reflect the magnitude of the event risk having surged to a record high of 106.2%. EURUSD support is at 1.1296-1.1353 while the Jun-8 high at 1.1415, a six-week peak, provides an upside waypoint.
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